Investing for Long-Term Value Creation

25 Pages Posted: 17 Sep 2018

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Willem Schramade

RSM Erasmus University; Sustainable Finance Factory

Multiple version iconThere are 2 versions of this paper

Date Written: September 2018

Abstract

In the transition to a sustainable economy, companies are increasingly adopting the goal of long-term value creation, which integrates financial, social and environmental value. However, investors struggle to invest for long-term value and perform the social function of finance. Traditional investment approaches, based on the neo-classical paradigm of efficient markets and portfolio theory, only capture financial value in their financial risk and return space. Attempts at ESG integration are typically too shallow to overcome this problem. In this paper, we examine the set of issues that make this problem so stubborn and we outline the contours of an alternative paradigm that is better able to pursue long-term value creation. Its elements include short investment chains, active management that assesses companies' transition preparedness, concentrated portfolios, and deep engagement.

Keywords: Active investment, adaptive markets hypothesis, engagement, ESG factors, fundamental analysis

JEL Classification: G11, G12, G14, Q01

Suggested Citation

Schoenmaker, Dirk and Schramade, Willem, Investing for Long-Term Value Creation (September 2018). CEPR Discussion Paper No. DP13175, Available at SSRN: https://ssrn.com/abstract=3250791

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Willem Schramade

RSM Erasmus University ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands

Sustainable Finance Factory ( email )

18
Rotterdam, 3034 SG
0682011037 (Phone)

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