MATTER and UKSIF – the Sustainable Investment and Finance Association, held a meeting on Responsible Innovation for investors on Tuesday 25th October. The meeting explored some of the issues associated with Responsible Innovation and emerging technologies (particularly nanotech) and discussed investor views about the way companies interact with them in this area. (See below for the event programme).
Sacha Sadan, Director of Corporate Governance at Legal & General Investment Management, who hosted the meeting, explained “We perceive a critical lack of ambition in long term R&D and also a fear of talking about their ground-breaking research from major companies – in terms of opportunity or risk. Investors need to ask more of companies about the long term technological changes that could effect them and what they are doing to combat/embrace these changes. We should hope that companies respond with a more open and strategic approach.”
The meeting highlighted the following areas:
Companies don’t communicate well about innovation...
The unanimous view among the 20+ investors and rating agencies attending was that companies were very poor at communicating about their technology innovation with their investors. The focus on short term results and nervousness about speaking about their future activities, particularly, though not exclusively involving new technologies, means that investors fail to get the strategic overview they want, particularly from the large companies. “I think they are scared to talk about it, because they are worried we will react badly,” explained one. “But it could provide the key to some of the future value for the company, so we really want to know how these technologies can help them.”
…Nor about how the are managing risk
In addition they were unable to guauge the risks the companies were taking in this area, as again companies failed to communicate about the systems of oversight they had in place to manage and mitigate these risks. Another suggested “They all probably have it under control, but we don’t know what they are doing, so can’t factor either confidence or risk into our analysis.”
But investors also don’t know the questions to ask
The narrow focus of Investor Relations departments was seen as a particular barrier to this type of communication, though the investors themselves admitted that they also didn’t really know what questions to ask to enrich their analysis.
Lack of ambition is a real concern
However a focus on incremental improvements and lack of ambition about innovation may be the biggest problem holding companies back in terms of their own innovation and growth.
This poverty of aspiration may also be limiting progress on finding solutions to some of the most pressing problems we all face. These investors want to see companies being more ambitious, more innovative and unafraid to communicate about what they are doing.
Investors should share some of the blame!
However, MATTER also pointed out that investor attitudes to risk, focus on short term results and unwillingness to provide the enough of the ‘right’ type of funding for companies involved in new technologies have made a significant contribution to this problem!
Next Steps – a business/investor group exploring questions and answers?
The group wanted to take steps to rectify this problem and MATTER proposed a collaborative group of investors and businesses be convened to explore together what questions to ask and how companies and investors can work better together. This was very warmly received.
This fits very well with our “Walking with Stakeholders” theme which is currently exploring ‘What’s fair to share’ from the angle of the general public, this project could explore ‘What’s fair to ask and fair to share with investors”.
So that’s our job cut out for the Autumn! We would be very interested to your views and responses to this concept and the views of investors outlined here. In addition if you are a company or an investor and would be interested in joining this collaborative group, then email Hilary on hilary@matterforall.org or call us on 0207 520 9086
Responsible Innovation for Investors – programme
03:00 Registration
03:10 Welcome by Catalina Secreteanu (UKSIF)
03:15 Sacha Sadan welcome from Legal & General
03:20 Stephanie LeNguyen, Sustainalytics – Nanotechnologies overview
03:40 Hilary Sutcliffe, MATTER, About Responsible Innovation
04.00 David Santillo, Greenpeace – Ten key points on Responsible Innovation (David is preparing a blog on his presentation to be posted on MATTER website shortly)
04:15 Q&A and discussion, chaired by Sacha Sadan
05:00 Event Ends.
From Prof Peter Dobson, fonder of Oxonica, Oxford BioSensors, now Academic Director of the Begbroke Science Park and National Advisor on Nanotechnologies to RCUK. Received by email
Very interesting. I can see shades of the “Open Innovation” debate in your summary.
In some ways I sympathise with the idea of more information sharing at the early stages, and indeed that was the model that worked very well in Japan for many years. I am very surprised that investors were saying this, because in the past they have encouraged companies to patent or keep secret much of the potentially “market-making” work.
Personally I find myself at odds with many of the open innovation protagonists too. They have usually read a bit of Chesbrough’s work and not looked at the detail……it was originally a ploy by large corporations to hoover up ideas from small companies and universities, and really nothing has changed. Under open innovation or information sharing, how do investors create value?
Here is David Santillo’s response to our report which he presented at the meeting.
http://www.matterforall.org/blog/category/responsible-innovation/