If there were no short-term gains
The structure of our economy predisposes us to lots of little mistakes. In the span of a lifetime, only the most traumatic events get noticed: bankruptcy, a windfall, a capital purchase. Every financial transaction is a little investment, but with shortening time horizons we’re losing sight of aggregate impacts to our world.
Recent activity in responsible investing and the attribution of hard environmental costs to common businesses (e.g. How much fuel was burned to get that tomato to your local grocery store?) leads me to believe that delayed gratification is needed to stave off social and environmental damage caused by businesses.
As long as equity can be traded seconds after its acquired, there is little incentive a) for managers to make long-term decisions and b) for investors to scrutinize all risks. A better model for investment that would address the current ignorance of long-term business impact is a low liquidity stock, one that can’t be traded for 18 months to 2 years. This poses a large amount of risk, but fair markets should compensate for that risk.
Although the risk is much higher, it forces companies to factor in expected costs for environment and social impact. Policy makers are already seeking ways to pay for these problems either through taxes or litigation. If those concerns are baked into the next generation of businesses, there might be some big opportunities to improve the environment without building up a new layer of service agencies and cleanup grants.
