David Blood, co-founder with Al Gore of Generation Investment Management, has entered the ‘Occupy Wall Street’ debate, saying it could be a turning point in market capitalism.
Blood, former CEO of Goldman Sachs Asset Management, ditched a planned presentation on climate change at an event in London today to comment on the root causes of the protests and their potential impact.
Significantly, the meeting took place in St Paul’s Cathedral, just yards from the Occupy London Stock Exchange protest camp. Abandoning his proposed text, Blood told the audience of church investors: “It’s the folks outside – something is happening. You’re making a huge mistake if you don’t think what they’re talking about is relevant. We’d better start getting our head around it.” He called on investors to engage with the protestors, adding that the protests could be the ‘inflection point’ that had been predicted but didn’t happen with the collapse of Enron ten years ago and Lehman Brothers seven years later.
He said the fund management world had its own problems to solve as part of the current market crisis.For example, he said the incentive structures for corporate managers and fund managers, were “terrible” and needed fundamental change.
In addition, he said that investors looking at asset managers’ performance every 90 days were “contributing to the challenge”. On the issue of corporate disclosure, Blood said the idea of separate sustainability reporting was flawed. He explained that if the price of carbon was included on a company’s balance sheet, then “Chevron looks very different”, adding that what was needed was “a holistic view of value”.
“The problem is capitalism itself is broken or nearly broken,” he said in response to a question. Blood said he was still a believer in markets, but that investors had to “fix what is broken”. Otherwise, he said, the financial services industry risked losing its license to operate.
He called on the $35trn of assets signed up to the UN Principles for Responsible Investment to “actually operate on those principles” and incentivize their fund managers appropriately: “If asset owners did that we’d take a really big step forward.”