About the FCLT Gold Standard

The FCLT Gold Standard defines recommended practices for companies, asset owners and asset managers seeking long-term performance. It focuses on governance, incentives, engagement and dialogue, and metrics, drawing on FCLTGlobal research, third-party evidence and consultation with more than 70 member organisations. It is intended as a voluntary reference rather than a compliance or disclosure framework.

Gold Standard for asset owners

Asset owners should establish governance structures that support long-term decision-making, including independence from political cycles, investment expertise on boards, delegation of manager selection to investment staff and diverse board representation. Evidence cited by FCLTGlobal associates board diversity, active ownership and effective investment strategy with stronger net returns.

Staff incentives should reinforce multi-year performance rather than short-term results. Asset owners are encouraged to provide competitive employment conditions and make senior investment staff accountable for total-fund performance over multiple years. A cited 2019 survey found 77% of asset owners were concerned that short-term incentives were not aligned with long-term objectives.

Engagement with external managers should concentrate on strategy, capital allocation, governance and remuneration. Performance assessment should emphasise long-term outcomes, including funding liabilities, achieving return targets and multi-year reporting. Funds should also consider internal charges for unpriced externalities such as carbon to incorporate potential future costs into investment decisions.

Gold Standard for asset managers

Asset managers should maintain independent governance, limit capacity-constrained strategies where necessary and encourage longer client commitments to reduce pressure from short-term capital movements. Diverse investment teams can broaden perspectives and potentially improve risk-adjusted returns.

Investment professionals should be evaluated over at least five years, while portfolio managers should hold meaningful long-term ownership in their funds. Client relations and business development remuneration should similarly reflect long-term client returns rather than primarily fundraising or sales targets. Engagement with portfolio companies should focus on long-term strategy, governance, capital allocation and remuneration.

Managers should incorporate potential future pricing of externalities, including carbon, into investment decisions. They should also emphasise client outcomes through measures such as asset-weighted returns, which account for the timing and size of investor cash flows.

Gold Standard for companies

Companies should align boards and executives with long-term value creation through meaningful equity ownership of at least five years, diverse leadership and greater board attention to strategy, business models and risk. FCLTGlobal research cited in the report found that the most age- and gender-diverse boards among MSCI ACWI firms from 2010–2017 achieved 3.3 percentage points higher return on invested capital than the least diverse boards.

CEO remuneration should favour long-term equity ownership, while broad employee ownership can align workforce and shareholder interests. The report cites research associating investment in employees with four percentage points higher three-year return on invested capital compared with peers.

Companies should replace excessive emphasis on quarterly targets with long-term investor roadmaps covering growth drivers, strategic objectives, capital allocation and relevant performance indicators. They should report material sustainability metrics, including applicable ISSB or local standards, and incorporate externalities such as carbon into capital allocation. Long-horizon R&D and innovation should also be maintained to develop new profit streams and respond to disruption, including artificial intelligence, geopolitics and decarbonisation.

About FCLTGlobal

FCLTGlobal is a non-profit organisation focused on directing capital towards long-term value creation. Its work addresses the investment value chain from savers and asset owners through asset managers and companies, with the aim of supporting sustainable economic outcomes for savers and communities.