Chapter 6 – Sustainability
United Nations Principles for Responsible Investment (PRI) and ESG
As it says on the United Nation’s website, the committee on PRI (Principles for Responsible Investment)
“We work to understand how environmental, social and governance (ESG) issues – such as climate change, human rights and tax avoidance – impact investments, and we support our international network of investor signatories in incorporating these factors into their investment and ownership decisions.
The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.”
As is says on the United Nation’s website, the committee on PRI (Principles for Responsible Investment)
“We work to understand how environmental, social and governance (ESG) issues – such as climate change, human rights and tax avoidance – impact investments, and we support our international network of investor signatories in incorporating these factors into their investment and ownership decisions.
The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.”
What is responsible investment?
https://www.unpri.org/pri/what-is-responsible-investment
Responsible investment is an approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns.
Why invest responsibly?
The global momentum around responsible investment is driven by:
- recognition in the financial community that ESG factors play a material role in determining risk and return;
- understanding that incorporating ESG factors is part of investors’ fiduciary duty to their clients and beneficiaries;
- concern about the impact of short-termism on company performance, investment returns and market behaviour;
- legal requirements protecting the long-term interests of beneficiaries and the wider financial system;
- pressure from competitors seeking to differentiate themselves by offering responsible investment services as a competitive advantage;
- beneficiaries becoming increasingly active and demanding transparency about where and how their money is being invested;
- value-destroying reputational risk from issues such as climate change, pollution, working conditions, employee diversity, corruption and aggressive tax strategies in a world of globalisation and social media.
What are environmental, social and governance (ESG) factors?
Examples of environmental, social and governance (ESG) factors are numerous and ever-shifting. They include:
Environmental
- climate change
- greenhouse gas (GHG) emissions
- resource depletion, including water
- waste and pollution
- deforestation
Social
- working conditions, including slavery and child labour
- local communities, including indigenous communities
- conflict
- health and safety
- employee relations and diversity
Governance
- executive pay
- bribery and corruption
- political lobbying and donations
- board diversity and structure
- tax strategy