Shaping A Public Fiduciary For Financial Markets
Simon Zadek, Senior Visiting Fellow, Centre for International Governance Innovation and Senior Fellow, Global Green Growth Institute
Current financial market reform efforts have focused on securing stable and resilient financial markets. The public purpose of financial markets, however, concerns the resilience of the broader economic, social and ecological systems within which financial markets operate, a purpose largely ignored in the current policy debate and practice. Sustainable investing has demonstrated proof of concept but will not have systemic impacts in its current forms and trajectories. Needed is a ‘public fiduciary’ for financial markets that reflects the interests of impacted, yet voiceless actors, future generations, excluded communities and natural capital.
Advancing a public fiduciary would involve a six-point programme focused on changes in fund managers’ basis of remuneration, investors’ fiduciary arrangements, investment principles of sovereign wealth funds, sovereign and corporate credit rating methods, fiscal interventions and transparency requirements. These changes, all tested already in practice, technically feasible and highly leveraged in their potential, require political and business leadership to advance at scale. Needed is action at Rio+20 and through the UN High Level Panel on Global Sustainability, and associated and broader action by progressive coalitions involving civil society, business and policy institutions, to reduce and realign the political influence of financial market actors and their potential for regulatory arbitrage, essentially an issue of the governance of societies’ financial assets.
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