short bias

Most financial professionals favor the pursuit of short-term profits over long-term considerations, including environmental ones. This short-term bias can largely be explained by the tendency to base asset allocation decisions on a historical view of risks and returns and by the assessment of asset manager’s performance on a quarterly basis. From a risk perspective, the materiality of most environmental risks appears significantly longer than the investment horizon and risk analysis of average fund managers, including SRI funds. This mismatch has been dubbed the “Tragedy of the Horizon”.

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