Investor capitalism, sustainable investment and the role of tax relief

Dionysia Katelouzou and Eva Micheler

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This contribution examines the connection between investor capitalism and sustainable investment. It will be observed in this article that investor capitalism has gone through a structural change. Individual investors have been replaced by funds. Financial service providers have emerged that assist investors in managing and holding investments. This development coincided and was arguably facilitated by the growth in workplace and personal pensions. Pensions are subsidised by the government through tax relief. This financial contribution of the government is justified on social policy grounds. But it has the effect that pension savers, who receive substantial return by saving tax, are deprived of a reason to take an interest in how their money is invested. This not only deprives the service providers assisting pension savers from oversight from their ultimate customers. It also can help to explain why pension savers do not actively select investment products but rely on the default settings suggested by their employers. If the government is serious about encouraging investor capitalism to bring about sustainable business it should start with its own financial contribution, which has coincided with the emergence of the current model of investor capitalism, and connect pension tax relief to sustainable investment practices.

Keywords: sustainable investment; green investment; social investment; pension tax relief; ESG; stewardship; sovereign wealth funds; retail investors; workplace pensions; personal pensions; pension trustees; independent governance committees; auto-enrolment; NEST; disclosure; kay review (search for similar items in EconPapers)
JEL-codes: F3 G3 J1 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2022-03-01
New Economics Papers: this item is included in nep-age and nep-env
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Published in European Business Organization Law Review, 1, March, 2022, 23(1), pp. 217 - 239. ISSN: 1566-7529

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:113380

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