Scottish Field

ASK THE EXPERTS

RATHBONE INVESTMENT MANAGEMENT LTD’S TONY SMITH JOINS US TO OFFER SOME MUCH NEEDED CLARITY ON CAPITALISM

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HAS CAPITALISM LOST ITS WAY?

ANSWER: Markets have been on one of the longest bull runs in history, but large swathes of people are feeling left out of this success story and losing trust in capitalism itself. It may be delivering returns for shareholde­rs, but not in a sustainabl­e way if the other stakeholde­rs aren’t sharing in the benefits or, worse, if they’re paying a cost for delivering those returns.

Yet we hold firmly to the belief that capitalism is not the problem, it’s the solution — when pursued responsibl­y. In essence we see true capitalism, what we’re calling ‘responsibl­e capitalism’, as a social contract between businesses, the state and consumers, working together for the maximum long-term benefit of all. That’s certainly where it started.

The 18th-century invention of limited-liability companies suddenly protected businessme­n from risking everything. This released innovation and with it, great strides in transport, electrific­ation, increasing life expectancy, and many other areas. These are the roots of capitalism that it needs to return to. Why care?

There are compelling reasons for every long-term investor to care about responsibl­e capitalism, regardless of whether they care about the societal benefits. Ignoring them, and paying heed only to short-term profit metrics, will inevitably have immediate negative consequenc­es for the socioecono­mic system, but it will also jeopardise longer-term profit opportunit­ies for investors.

We recognised the importance of responsibl­e investing years ahead of most of our peers and were one of the early private wealth managers to sign up to the Principles for Responsibl­e Investment (PRI) ten years ago. Today we see responsibl­e capitalism as essential in providing the solutions to some of the world’s biggest challenges – such as resource depletion, climate change and income inequality – and also a huge area of opportunit­y for long-term investors.

We’ve achieved a lot over the past ten years, and look forward to doing more to embed principles of responsibl­e capitalism into our investment processes.

TONY SMITH FCSI, INVESTMENT DIRECTOR. RATHBONE INVESTMENT MANAGEMENT LTD. TEL. 0141 248 4311, GEORGE HOUSE, 50 GEORGE SQUARE, GLASGOW, G2 1EH WWW.RATHBONES.COM

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