UN Principles for Responsible Investment

The United Nations-supported Principles for Responsible Investment Initiative is an international network of investors that support responsible investing.

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By Sally Campbell, Investment Manager, JBWere

Responsible investing is an approach to investment which acknowledges the relevance of environmental, social and governance (ESG) factors, as well as the long term stability of financial markets. It is not merely a “feel good” approach to investing. It is recognition that long-term sustainable returns are underpinned by a well-functioning and well-governed economic system. This is a significant advance on the view that responsible investing must come at the expense of maximising returns.

What are the UN principles for Responsible Investment?

The United Nations-supported Principles for Responsible Investment (UN PRI) Initiative is an international network of investors established in 2006 which support this view of responsible investing and publicly agree to incorporate the six principles into their investment framework. The six principles are as follows:

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the principles
  6. We will each report on our activities and progress towards implementing the principles.

As is typically the case, there is an acknowledgement that there is no “one size fits all” approach to implementing these principles. Each organisation is given the flexibility to tailor their approach to fit their specific circumstances. This allows the principles to be compatible with organisations of a range of sizes, in a range of markets, across a range of asset classes.

That said, the UN PRI Initiative provides examples of ESG issues as detailed below.

Environmental

Biodiversity loss, greenhouse gas (GHG) emissions, climate change impacts, renewable energy, energy efficiency, resource depletion, chemical pollution, waste management, fresh water depletion, ocean acidification, stratospheric ozone depletion, land use changes and nitrogen and phosphorus cycles.

Social

Activities in conflict zones, distribution of fair trade products, health and access to medicine, workplace health safety and quality, HIV/AIDs, labour standards in the supply chain, child labour, slavery, relationships with local communities, human capital management, employee relations, diversity, controversial weapons and freedom of association.

Governance

Executive benefits and compensation, bribery and corruption, shareholder rights, business ethics, board diversity, board structure, independent directors, risk management, whistle-blowing schemes, stakeholder dialogue, lobbying and disclosure. This category may also include business strategy issues, both the implications of business strategy for environmental and social issues and how the strategy is to be implemented.

More signatories

When the UN PRI Initiative was launched in 2006, it did so with significant support from investment community world-wide. The size of assets under management of initial signatories was more than US$4 trillion at the time. As it stands today, there are close to 1,400 signatories, with 285 asset owners, 904 investment managers and 194 professional service partners, with more than US$59 trillion in assets under management.

The full list of signatories is available on the UN PRI website at http://www.unpri.org/signatories/signatories/