Mainstream investors holding trillions of dollars in assets are being ‘freed up’ to pursue investment approaches that more fully account for environmental, social and governance (ESG) considerations, a global authority in the responsible investment community has claimed.
‘Demystifying Responsible Investment Performance’, launched today by the United Nations and a group of leading asset managers from around the world, may debunk the myth that investors acting responsibly have to sacrifice investment performance in the process.
The report was jointly developed by UNEP FI and Mercer to further the worldwide investment community’s understanding and implementation of responsible investment.
“Over the past four years, the joint work undertaken by the UN and these asset managers has built an irrefutable case that shows from a technical, legal and now, a performance standpoint, that responsible investment approaches do not harm investment performance and, in many cases, can boost it,” says Dr. Matthew Kiernan, the founder and chief executive officer of Innovest Strategic Value Advisors, a New York-based investment advisory firm.
Kiernan raised the point that some 240 institutional investors from 30 countries, representing $10 trillion in assets; roughly equivalent to 20% of global capital market value, have signed up since April 2006 to the United Nations Principles for Responsible Investment (UNPRI). The UNPRI, initiated by former UN Secretary-General Kofi Annan in 2005 is a framework that enables institutions to implement responsible investment approaches.
“Naturally, performance speaks loudest for most investors. A constant barrier to the widespread acceptance of responsible investment has been the misconception that it automatically translates to underperformance. Therefore, it is important to recognize that the new philosophy of responsible investment is proactive. It systematically integrates ESG factors into the investment process to enhance financial performance,” says Xavier Desmadryl, co-chair of the UNEP FI asset management working groups and global head of SRI Research at HSBC Investments.