UN bodies work to integrate sustainability into investors’ fiduciary duties

28 February 2016

Editor

EU regulation

The United Nations Environment Programme Finance Initiative (UNEP FI), the Principles for Responsible Investment (PRI), and The Generation Foundation, the advocacy initiative of Generation Investment Management, have launched a three year project which aims to persuade investors to take full account of material sustainability factors in their investment practices and to see this as their clear fiduciary duty.

The project will be building on the findings of the UNEP, PRI and UN Global Compact report Fiduciary Duty in the 21st Century, published in 2015, and will engage asset owners, asset managers and policy makers across national and international jurisdictions to harmonise a global understanding of fiduciary duty which incorporates sustainability. The project will develop an international statement on fiduciary duty and sustainable development which, the three groups believe, would create a cohort of signatories committed to integrating sustainability into their fiduciary duties.

The  project will also target the countries covered by the report - Australia, Brazil, Canada, Germany, Japan, South Africa, the UK and US - to encourage their governments and regulatory agencies to clarify the scope of fiduciary duty such that investors must take explicit account of environmental, social and governance issues in their investment practices and proactively engage with companies on these issues. Further analysis will also be made of the important Asian markets of  China (including Hong Kong), India, Malaysia, Singapore and South Korea and plans and recommendations will be made for each country to encourage more consideration of sustainability by investors.

Although sustainability is seen as increasingly important by all institutional investors - and there are specialist fund managers in this area - it is principally the large public pension funds in the US and European which will focus on sustainability as part of their engagement and investment programmes. The large Norwegian fund, the Government Pension Fund Global, which is managed by Norges Bank and invests money made from its oil industry on behalf of the government, is one example of a global institutional investor which engages with companies about sustainability and similar issues. The fund recently published its report covering its responsible investment activities during 2015.

The fund reported that its responsible investment approach could lead it to divest from companies following an assessment of environmental and social risk factors. The fund divested from 73 companies on the basis of such assessments in 2015 and in the last four years it has divested from a total of 187 companies. During 2015 the fund expanded its risk analyses to look more closely at social and governance issues relating to health, safety and the environment, human capital and corruption. The fund also began publishing its voting intentions in certain cases prior to company meetings as the fund will use its voting power to promote sustainable development and good corporate governance.

Meanwhile, in the US, shareholder resolutions at company meetings calling for better sustainability reporting by companies have seen increasing support by investors according to James McRitchie, the shareholder activist who writes the Corporate Governance website. Earlier this month at ESCO Technologies AGM a resolution put forward by Walden Asset Management  requesting a comprehensive sustainability report, including greenhouse gas (GHG) emissions reduction goals, received 43.5% support, excluding abstentions. At Emerson Electric's AGM a  proposal co‐led by Mercy Investment Services and Wespath Investment Management, requesting a comprehensive sustainability report, received 47% support. Similar proposals made in recent years at the two companies have averaged 26% and 37% support at ESCO Technologies and Emerson Electric, respectively Ritchie reported.

Latest News

SHareholder meeting

Accountability Versus Allocation: Who Is Corporate Reporting For?

SHareholder meeting

SFDR Review Moves Forward, But Key Questions Remain for Investors

SHareholder meeting

German governance code reform: Minerva supports simplification, but draws a line at investor visibility

SHareholder meeting

FRC’s new regulatory approach signals a shift from rule-making to market stewardship

SHareholder meeting

Shein lists in Hong Kong at reduced valuation after protracted IPO journey

SHareholder meeting

SEC sends executive pay disclosure overhaul to White House for review

Featured Briefings

Minerva Briefing

Shareholder Proposal Voting Trends 2026 H1

Minerva Briefing

Virtual-Only AGMs

Minerva Briefing

UK Proxy Season Review 2026

Minerva is a global provider of sustainable stewardship solutions with over 30 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data and expert insights, enabling them to navigate the intricate and ever-evolving landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.

Related Stories

No items found.