New
York/Nairobi - Institutional investors have a far greater
opportunity - and in some cases a legal obligation - to
incorporate environmental, social and governance issues
into their investment decision-making than is traditionally
believed. This is the conclusion
of a new study, done on behalf of the United Nations Environment
Programme’s Finance Initiative.
The study finds that the integration
of environmental, social and governance (ESG) issues into
investment analysis, so as to more reliably predict financial
performance, is clearly permissible and is arguably required
in all jurisdictions.
The study, launched today at the United
Nations headquarters, has been compiled by leading international
law firm Freshfields Bruckhaus Deringer.
The 150-page report, which focuses
on the largest capital markets jurisdictions - Australia,
Canada, France, Germany, Italy, Japan, Spain, the UK and
the US, also considers the likely evolution of the interpretation
of the law with respect to investors and ESG issues. The
study is entitled: "A legal framework for the integration
of environmental, social and governance issues into institutional
investment."
Klaus Toepfer, Executive Director
of UNEP, commenting on the study, said: "This is
groundbreaking work that will accelerate the integration
of ESG issues into the mainstream investment community
worldwide. What was once considered a niche area is set
to become mainstream as institutions with trillions of
dollars under management embed ESG thinking into their
investment approach."
He added: "As the world's largest
pension schemes, government funds, insurance reserves
and foundations adjust this will set in train a new dynamic
along the investment chain. When these large institutional
investors move on ESG issues the broader markets will
listen and react."
Paul Watchman, Partner at Freshfields
Bruckhaus Deringer and senior author of the study, told
more than 450 participants at the two-day UNEP FI 2005
Global Roundtable meeting at UNHQ that: "We are not
suggesting that investors pursue a moral crusade but,
in most jurisdictions, the law gives a wide discretion,
encircled by general duties rather than exacting standards.
A number of the perceived limitations on investment decision-making
are illusory.
Mr Watchman explained that those advocating
a greater regard for ESG issues in investment decision-making
often encounter resistance on the basis of a belief that
institutional principals and their agents are legally
prevented from taking account of such issues. "Far
from preventing the integration of ESG considerations,
the law clearly permits and, in certain circumstances,
requires that this be done," he said.
Mr Watchman, a keynote speaker at
the UNEP FI Global Roundtable of bankers, insurers and
asset managers, as well as government and civil society
representatives, continued: "It's not everyday that
commercial lawyers have the opportunity to challenge industry
to be more courageous, but that is the position in which
we find ourselves having produced this report for the
UNEP FI".
The report's lead author concluded
by stressing that: "Institutional investors have
more freedom to integrate ESG issues into their decision-making
than they think. Whilst normally we find ourselves encouraging
our clients to be more cautious, in this case we can instead
say 'be more imaginative'."
About the UNEP FI Global Roundtable
Initiated in 1994, the UNEP FI Global
Roundtable has spanned the globe from Chicago to Frankfurt,
and from Rio de Janeiro to Tokyo. It is now recognised
as the premier finance and sustainability event, gathering
the most influential practitioners in the field.
Over 450 participants from the financial
services sector, government agencies, civil society, academia
and the broader corporate world are attending the 2005
Roundtable in New York, with official sponsors including
Bank of America, ABN AMRO, JPMorgan Chase, Westpac and
Deutsche Bank.
Under the theme of "A World of
risk: A world of opportunities?", the Roundtable
will be the scene for cutting-edge discussions around
themes following the business lines of financial institutions
and is designed to help decision-makers explore the real
risks and opportunities arising from complex sustainability
challenges.
Among the highlights of the event will be the release
of the Freshfields Bruckhaus Deringer study and the announcement
of preliminary findings of UNEP FI’s second round of research
on the materiality of environmental, social and governance
issues to securities valuation.
Editor Notes
Freshfields Bruckhaus Deringer study
Full title: A legal framework for
the integration of environmental, social and governance
issues into institutional investment
Available at: http://www.unepfi.org/
Contact: investment@unepfi.org
UNEP FI Global Roundtable 2005
Confirmed speakers and moderators
include:
Robert Annibale - Head of Global Microfinance
Business, Citigroup
Joseph Boren - President and CEO,
AIG Environmental
James Cameron - Founder, Climate Change
Capital
Bernard Cochemé - CEO, UN Joint
Staff Pension Fund
Hendrik Garz - Director Equity Strategy
Services, WestLB
Martin Hancock - COO, Westpac (London)
Hanns Michael Hölz - Global Head
of Sustainable Development and Corporate Citizenship,
Deutsche Bank
Leo Johnson - Co-Founder, Sustainable
Finance
Luiz Maia - CEO, ABN AMRO Asset Management
Brazil
Louis Redshaw - Head of Environmental
Markets, Barclays Capital
Jesus Tambunting - Chairman and CEO,
Planters Bank of the Philippines
Paul Watchman - Partner, Freshfields
Bruckhaus Deringer
Vincent Zeller - CIO, Groupama
Sponsors & Supporters:
Bank of America, ABN AMRO, JPMorgan
Chase, Westpac, Deutsche Bank, CIBC, Citigroup, Royal
Bank of Canada, Calvert Group, Bank of Tokyo-Mitsubishi,
Insurance Australia Group and National Australia Bank.
UNEP Finance Initiative
The United Nations Environment Programme
Finance Initiative (UNEP FI) is a unique global partnership
between the United Nations Environment Programme (UNEP)
and the private financial sector. UNEP FI works closely
with approximately 170 financial institutions that are
signatories to the UNEP FI statements and a range of partner
organisations to develop and promote linkages between
sustainability and financial performance. Through regional
activities, a comprehensive work programme, training and
research, UNEP FI carries out its mission to identify,
promote and realise the adoption of best environmental
and sustainability practice at all levels of financial
institution operations. For more information on UNEP FI
see: http://www.unepfi.org/
Freshfields Bruckhaus Deringer
Freshfields Bruckhaus Deringer
is a leading international law firm, with over 2,400 lawyers
in 28 offices in 18 countries across Europe, Asia and
the US. The environmental, planning and regulatory law
practice is widely recognised as a global leader in the
field for the breadth and depth of its expertise. Freshfields
also has a respected pro bono legal practice, which has
enabled the company to work in close cooperation with
international governmental and non-governmental organisations.
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