The corporation came to us from the monarchies of medieval times.  Monarchs were the conscience of the corporation and could revoke a corporate charter. The oldest existing corporation is Stora Enso, a Scandinavian basic materials company, started in 1288. Corporations were a catalyst to the expansion of European colonialism from the 1400s to 1700s. At one time the Hudson’s Bay Company controlled 15% of the North American landmass.

In the 18^th century, the authority to charter corporations was passed from monarchies to legislative and administrative bodies. However, a corporate charter could still be revoked if the corporation failed to meet the needs of the sovereign.

The United States inherited the concept of a corporation in 1776. The authors of our Constitution feared the power of corporations. Corporate law was designed to protect the public interest rather than the interests of shareholders. At that time corporate charters were closely regulated by the states and were seen as the external conscience of corporations. Beginning in the 19^th century, the states’ ability to revoke charters was limited, which granted corporations more power. Limited liability for officers, directors, and shareholders was adopted. The business of corporations became to maximize wealth for shareholders through unlimited growth. As we continually see today, this objective often comes at the expense of employees, community, and the environment.

Today there are new choices in corporate governance from benefit corporations to an L3C which is a hybrid for profit/non profit. To learn more about these innovative new corporate structures, see “The Rise of the Charitable For-Profit Entity” by Evangeline Gomez in the January issue of Forbes.

Carsten is Portfolio 21 Investments' founder and Chief Executive Officer. He has more than 25 years of experience in socially and environmentally responsible investing.

What about risk?  Certainly some of the risks associated with the market bottom have been addressed.  We don’t have to worry about a big bank going bust tomorrow as we did back in the dark days of 2008 and 2009 (whether or not a few of them should have  is another story).  But is there really less risk in the market these days?

Central Banks worldwide have tripled the size of their balance sheets.  In addition to this being an event without historical precedent, there is the none-too-small matter of increased interest payments when rates eventually rise.

Greece did not default, but it is certainly not out of the woods, while Portugal, Italy, and Spain also find themselves in a heavily wooded area.  The European banks are still highly leveraged and loaded with debt from Portugal, Italy, Ireland, Greece, and Spain.

Corporate profit margins are at a record high with nowhere to go but…higher to new records?

The housing market is still searching for a bottom and unemployment, though improved, is still a drag.

Throw in an Iranian nuclear threat and you start to wonder if risk hasn’t increased since 2009.

So, why have stocks gone straight up off the bottom?  Some say the stock market is forward-looking and has discounted all of the above risks already.   Some say that stocks have been and will continue to be bought because they are cheap relative to bonds (disregarding that bond prices have been and are being held artificially low).

Or, maybe, Central Bank liquidity has provided a backstop for investors, which has encouraged them to invest in the riskiest and relatively (to bonds and cash) cheapest asset available in a search for return of any kind. Expect to see some volatility once the money printing stops and the market is allowed to re-price assets.

Jim is Portfolio 21's Chief Investment Officer.  He has more than 20 years of experience in socially and environmentally responsible investing. 

The panelists critiqued the general trend toward short-term investing; for example, in the 1980s the length of an average stock investment was five years, whereas today it is only five months.  In another example, a panelist recounted attending a recent conference where Chief Financial Officers from various corporations were queried about their investment horizons.  The majority said their horizon is less than 1 year, some less than 1 quarter.  As investors have become more focused on the short term, the challenge is to develop a system that rewards longer-term thinking while incorporating broader environmental and social issues into investment decision making.

Areas for improvement suggested by the panelists include clarifying the legal framework for fiduciary responsibility. Most often, fiduciary responsibility focuses strictly on financial attributes without consideration of environmental or social concerns.  We believe fiduciary responsibility should incorporate environmental and social issues in order to comprehensively evaluate both risk and opportunity within sectors and companies.  Traditional investment analysis underestimates the long-term opportunities and risks associated with ecological limits.  As long term investors, we conduct fundamental research that combines traditional investment information with environmental research.  This process identifies companies that are innovative, competitive, and that are creatively responding to ecological limits.

Emily is a Senior Research Analyst with Portfolio 21 Investments. She has 9 years of experience in the environmental field.