Global Investors for Sustainable Development Alliance

Short-term pressures across non-financial corporations

A large proportion of real investment is channelled through non-financial corporations, both manufacturing and services. It is important to both scale up and better align investments by these actors to sustainable development. There is the need to counteract the decoupling of profits and investment that has coincided with an increased emphasis on short-term returns in the corporate sector.

Non-financial corporations have had an increasing tendency to channel profits to shareholders either in the form of dividend or share repurchase. This contrasts with the earlier ‘retain and reinvest’ approach of corporations when a larger share of corporate profits would go into reinvestment. Other impediments facing increased long-term investment in sustainable development by corporations include the increasing importance of quarterly reporting and short-term performance metrics, increased concentration, the structure and governance of corporate boards, and the prevalence of stock-based pay and options.