The aim of this project is to propose recommendations and new regulatory guidelines for institutional investors. These recommendations will involve organisational level changes, along with broader changes that might be necessary at the industry level to promote the adaptation and effective implementation of SI policies amongst institutional investors.

As the results from the other projects will become available, the work in project E will accelerate. Today the project is in its infancy, with most of the work being focused on discussions with portfolio managers about the potential impact and possible changes that can be made in incentive systems and especially if there are any negative effects from short-termism.

There is a large classical literature on the general problem of aligning the objectives of managers with the owners. In this more specialised setting it would refer to portfolio managers being reluctant to fully incorporate sustainability issues as a selection criteria, since t may create a portfolio that differs “to much” from ordinary benchmarks. Even if the portfolio manager has objective skills, it would still be in the managers interest not to fully incorporate those skills, if the mandate or the remuneration system is up for short-term evaluation.

The fiduciary optimal stopping rules must therefore take into account the trade-off between time in order to identify true manager skills and the cost of sub-performance, and how this trade-off can be influenced by the incentive system.