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From struggle in responsible investment to potential to improve global environmental governance through UN PRI

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International Environmental Agreements: Politics, Law and Economics Aims and scope Submit manuscript

Abstract

This article introduces an exploratory framework which, on a conceptual level, suggests that the United Nations Principles for Responsible Investment can contribute to the accessibility of responsible investment and encourage institutional investors to undertake it. By co-operating with leaders of global environmental governance and by engaging with investee companies in the field of the environment, responsible investment by institutional investors may help to improve the lack of coherence in global environmental governance.

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Notes

  1. We calculated the reported t test values as \( t = \frac{{\bar{x}_{1} - \bar{x}_{2} }}{s}\sqrt {\frac{{n_{1} n_{2} }}{{n_{1} + n_{2} }}} \), where \( s = \sqrt {\frac{{(n_{1} - 1)S^{2}_{1} + (n_{2} - 1)S^{2}_{2}}}{{n_{1} + n_{2} - 2}}} \), and \( \bar{x}_{1} \) and \( \bar{x}_{2} \) are sample means of the group under consideration, and n 1 and n 2, the number of observations.

Abbreviations

UN PRI:

United Nations Principles for Responsible Investment

UNEP:

United Nations Environment Programme

UN:

United Nations

ESG:

Environmental, Social and Corporate Governance issues

OECD:

Organisation for Economic Co-operation and Development

EU:

European Union

CFC:

Chlorofluorocarbon

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Acknowledgments

The corresponding author acknowledges the financial support of the Jenny and Antti Wihuri Foundation, the Foundation for Economic Education, and the Niemi Foundation. The authors are grateful for the valuable suggestions regarding this study from two anonymous referees.

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Authors and Affiliations

  1. University of Helsinki, PB 27, 00014, Helsinki, Finland

    Riikka Sievänen, John Sumelius, K. M. Zahidul Islam & Mila Sell

Authors
  1. Riikka Sievänen
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  2. John Sumelius
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  3. K. M. Zahidul Islam
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Corresponding author

Correspondence to Riikka Sievänen.

Appendix 1: The Principles for Responsible Investment

Appendix 1: The Principles for Responsible Investment

1.1 We will incorporate environmental, social and corporate governance (ESG) issues into investment analysis and decision-making processes

Possible actions:

  • Address ESG issues in investment policy statements

  • Support the development of ESG-related tools, metrics and analyses

  • Assess the capabilities of internal investment managers to incorporate ESG issues

  • Assess the capabilities of external investment managers to incorporate ESG issues

  • Ask investment service providers (such as financial analysts, consultants, brokers, research firms, or rating companies) to integrate ESG factors into evolving research and analysis

  • Encourage academic and other research on this theme

  • Advocate ESG training for investment professionals

1.2 We will be active owners and incorporate ESG issues into our ownership policies and practices

Possible actions:

  • Develop and disclose an active ownership policy consistent with the Principles

  • Exercise voting rights or monitor compliance with voting policy (if outsourced)

  • Develop an engagement capability (either directly or through outsourcing)

  • Participate in the development of policy, regulation and standard setting (such as promoting and protecting shareholder rights)

  • File shareholder resolutions consistent with long-term ESG considerations

  • Engage with companies on ESG issues

  • Participate in collaborative engagement initiatives

  • Ask investment managers to undertake and report on ESG-related engagement

1.3 We will seek appropriate disclosure on ESG issues by the entities in which we invest

Possible actions:

  • Ask for standardised reporting on ESG issues (using tools such as the global reporting initiative)

  • Ask for ESG issues to be integrated within annual financial reports

  • Ask for information from companies regarding the adoption of/adherence to relevant norms, standards, codes of conduct or international initiatives (such as the UN Global Compact)

  • Support shareholder initiatives and resolutions promoting ESG disclosure

1.4 We will promote acceptance and implementation of the Principles within the investment industry

Possible actions:

  • Include Principles-related requirements in requests for proposals (RFPs)

  • Align investment mandates, monitoring procedures, performance indicators and incentive structures accordingly (for example, ensure investment management processes reflect long-term time horizons when appropriate)

  • Communicate ESG expectations to investment service providers

  • Revisit relationships with service providers that fail to meet ESG expectations

  • Support the development of tools for benchmarking ESG integration

  • Support regulatory or policy developments that enable implementation of the Principles

1.5 We will work together to enhance our effectiveness in implementing the Principles

Possible actions:

  • Support/participate in networks and information platforms to share tools, pool resources and make use of investor reporting as a source of learning

  • Collectively address relevant emerging issues

  • Develop or support appropriate collaborative initiatives

1.6 We will each report on our activities and progress towards implementing the Principles

Possible actions:

  • Disclose how ESG issues are integrated within investment practices

  • Disclose active ownership activities (voting, engagement and/or policy dialogue)

  • Disclose what is required from service providers in relation to the Principles

  • Communicate with beneficiaries about ESG issues and the Principles

  • Report on progress and/or achievements relating to the Principles using a ‘Comply or Explain’ approach

  • Seek to determine the impact of the Principles

  • Make use of reporting to raise awareness among a broader group of stakeholders

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Sievänen, R., Sumelius, J., Islam, K.M.Z. et al. From struggle in responsible investment to potential to improve global environmental governance through UN PRI. Int Environ Agreements 13, 197–217 (2013). https://doi.org/10.1007/s10784-012-9188-8

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