Developing New Metrics
An Open-Source Project
Corporations, like humans, behave based on how they are measured. If we tell corporations and their leaders that they will be rewarded for maximizing short-term profit, then that is what they will do. If we want different behavior, we need to change the way they are measured.
The investment community is beginning to acknowledge that the singular focus on short-term profits is detrimental to the long-term financial health of corporations and causes external harm as well. Increasingly, corporations and their owners are realizing that they must take into consideration their impacts on society and the environment and that measuring their environmental, social and governance behavior (ESG metrics) yields benefits for the corporation and its stakeholders.
The World Federation of Exchanges, representing over 50 stock exchanges around the world, recently issued a report entitled “Exchanges and Sustainable Investment” which calls for enhanced use of key performance indicators around ESGs.
The Hauser Center at Harvard has released a similar report entitled “From Transparency to Performance: Industry Based Sustainability Reporting on Key Issues” which likewise calls for widespread use of such indicators and recommends that a commonly accepted standard for such reporting needs to be adopted throughout the investment community.
The Commonwealth Group is working with others to launch a project to establish such a standard set of measurements. The project will be a collaborative, open-source effort engaging contributors worldwide. Likewise the information generated will be in the public domain.
Commonwealth Group intends to use the resulting metrics as a fundamental building block of our UNIEX stock exchange.