This is a good example of how companies can become a force for good business because it describes recent changes in the fields of sustainable finance and responsible investment, why these changes were needed, and what needs to happen next.
Description:
If we are to achieve sustainable development, the world of finance and investment has a pivotal role to play.
In 2006, the Principles for Responsible Investment (PRI) recognised that integration of environmental, social and governance issues is fundamental both to good business and to thriving societies. More than 200 institutions, managing assets worth almost USD 10 trillion, have committed to these principles.
The purpose of this report is to explain in non-technical language:
- what has happened recently in the fields of sustainable finance and responsible investment
- what forces drove these changes
- what is now working, what is not, and what to do next
In 2003-04 the UN Global Compact and UNEP Finance Initiative began together to look at issues that either prevented or encouraged consideration of environmental, social and governance (ESG) issues in investment decision making. They found a large proportion of the investment community looking for ways to include these elements into their decision making, as a way to manage risk. A number of major corprorate governance scandals (Enron, Andersen Consulting, WorldCom, Parmalat) plus a rising awareness of climate change accelerated this desire to protect asset values over the long term. The PRI was conceived, negotiated and delivered by the heads of more than 20 of the world’s largest institutional investors as the way to bind together "the two ROIs": 'Return on Invesment' and ' Responsibility of Investment'.
Conclusions drawn on the views of 16 leading thinkers in the field of sustainable finance and responsible investment are that:
- embedding principles of sustainable finance and responsible investment is an ongoing 'work in progress'
- the world's largest institutional investors have shown a growing understanding of the need for change
- the world cannot be run as a 'business in liquidation' - we need sustainable models and finding these offers great opportunities
- analysis of environmental, social and governance issues can be very helpful in identifying risk
- there is also a need to remove elements of the investment system as it currently stands that 'perversely' encourage and incentivise short term thinking. This discourages the adoption of ESG perspectives.
- on the other hand, new forms of partnership are emerging, which seem to combine the best of both profit-making and an ESG approach
Finally, the most talented people are increasingly looking for employers where they can apply an ESG approach. The challenge is to institutionalise that approach.
Copyright restrictions prevent us from storing a copy of this report on the forceforgood website but you can download a copy from here: http://www.unpri.org/twcr/