The financial markets have a short-term orientation and private investors have long avoided developing markets due to impediments such as a perception of high risk, low returns, currency volatility and regulatory constraints. These long-standing market dynamics have curtailed impactful long-term investment.
To shift to long-termism within the finance sector, incentives within the investment chain need to be revised. The GISD Alliance has identified actions and issued recommendations that can provide impetus for long-termism across the financial sector (see Recommendations to incentivize key actors along the investment chain towards a longer term, sustainable perspective).
The GISD Alliance is prioritizing its efforts to advance two recommendations:
- Scaling the sovereign SDG-linked bonds market by developing practical and actionable guidance.
- Reforming internal performance incentives, including by mainstreaming an SDG-aligned index in collaboration with index providers.