Universal Ownership - Why environmental externalities matter to institutional investors (3.0 MB | 69 pages)

Large institutional investors are, in effect, “Universal Owners”, as they often have highly-diversified and long-term portfolios that are representative of global capital markets. Their portfolios are inevitably exposed to growing and widespread costs from environmental damage caused by companies. They can positively influence the way business is conducted in order to reduce externalities and minimise their overall exposure to these costs. Long-term economic wellbeing and the interests of beneficiaries are at stake. Institutional investors can, and should, act collectively to reduce financial risk from environmental impacts.

Published: 2011 | By: UNEP FI, UN PRI

Universal Ownership - Why environmental externalities matter to institutional investors (670 KB | 16 pages)

Summary of the full report

Published: 2010 | By: UNEP FI, UN PRI

Translating ESG into sustainable business value — Key insights for companies and investors (838 KB | 33 pages)

The UNEP FI Asset Management Working Group and the Markets & Valuation Work Stream of the World Business Council for Sustainable Development (WBCSD) have jointly published this report providing key insights for companies and investors on how their business and investment philosophy and practices going forward can better address the why, what and how of communicating corporate environmental, social and governance (ESG) performance to the capital markets.

The report is based on a series of UNEP FI-WBCSD workshops held globally in 2008, as well as key events in 2009. These provided a platform for companies and investors to collectively address barriers within capital market valuation processes that inhibit the proper disclosure and assessment of corporate ESG performance—underpinning the materiality of ESG factors to long-term, sustainable business value and to the performance of investment portfolios.

Business leaders and investors can use the report as a tool to advance the integration of ESG factors into corporate and investment decision-making, and to continue discussing the needed evolution towards more holistic and realistic capital market valuation processes.

Published: 2010 | By: UNEP FI and WBCSD

The materiality of climate change - How finance copes with the ticking clock (5.8 MB | 136 pages)

The third iteration of the UNEP FI Asset Management Working Group’s ground-breaking “Materiality Series,” which started in 2004 with “The Materiality of Social, Environmental and Corporate Governance Issues to Equity Pricing” and followed in 2006 by “Show Me The Money: Linking Environmental, Social and Governance Issues to Company Value”, exclusively tackles climate change. The full version of the 2009 report, “The Materiality of Climate Change – How finance copes with the ticking clock”, was launched at the UNEP FI Global Roundtable in Cape Town, South Africa, in October 2009 just weeks before the critical UN Climate Change Conference in Copenhagen, which will determine the post-Kyoto Protocol regime. The report provides a comprehensive review of key financial analyst and academic research on climate change in order to accelerate the integration of climate change risks and opportunities into fundamental financial analysis and practice. It includes expert commentary on a wide range of climate change issues, from US engagement and the EU agenda, the BRIC economies and carbon intensive sectors, to carbon capture and storage, energy efficiency, adaptation, and supply chains. It demonstrates yet another robust example of why it is vital for the financial markets that policymakers seal a fair, balanced and effective global deal in Copenhagen.

Executive summary

Published: 2009 | By: UNEP FI

Fiduciary responsibility – Legal and practical aspects of integrating environmental, social and governance issues into institutional investment (2.5 MB | 92 pages)

This report is a sequel to the UNEP FI Asset Management Working Group’s landmark 2005 "Freshfields Report" which, until now, has arguably been the single most effective document for promoting the integration of environmental, social and governance (ESG) issues into institutional investment. This 2009 follow-on report provides a legal roadmap for fiduciaries looking for concrete steps to operationalise their commitment to responsible investment.

The report—termed "Fiduciary II"— has three main elements. The first is an exploration of the legal perspective on how best to operationalise the integration of ESG issues into the investment process, particularly with respect to investment mandates and investment management contracts. The second is an analysis of responses to a pioneering survey questionnaire sent by the AMWG to investment management consulting firms, covering ESG issues as they relate to various aspects of the investment management process, including legal language. The third is a literature review that focuses on practical developments on the integration of ESG issues into the investment process, providing insights into the extent to which institutional investors have adopted, and can adopt, longer-term and more sustainable investment approaches. In addition, the literature review covers legal developments on fiduciary duty and ESG issues since, and including, the Freshfields Report.

The new UNEP FI report was released just a few days before the Principles for Responsible Investment (PRI) Annual Event in Sydney, Australia, which convened many of the world’s largest institutional investors and where the report’s findings were deliberated. Over 560 institutions from the global investment community, representing more than USD 18 trillion in assets, have now signed on to the PRI, an investor initiative in partnership with UNEP FI and the UN Global Compact. The PRI was launched in 2006 by then UN Secretary-General Kofi Annan and endorsed in 2007 by current UN Secretary-General Ban Ki-moon.

Media coverage
Press release

Published: 2009 | By: UNEP FI

Executive Summary: The materiality of climate change -- How finance copes with the ticking clock (54 KB | 10 pages)

The third iteration of the UNEP FI Asset Management Working Group's ground-breaking "Materiality Series," which started in 2004 with "The Materiality of Social, Environmental and Corporate Governance Issues to Equity Pricing" and was followed in 2006 by "Show Me The Money: Linking Environmental, Social and Governance Issues to Company Value," exclusively tackles climate change. The 2009 report, launched today at the Principles for Responsible Investment Annual Event in Sydney, Australia, comes just months before the critical UN Climate Change Conference in Copenhagen this December, which will determine the post-Kyoto Protocol regime. The report provides a comprehensive review of key financial analyst research on climate change in order to accelerate the integration of climate change risks and opportunities into fundamental financial analysis and practice. Furthermore, it demonstrates yet another robust example of why it is vital for the financial markets that policymakers seal an effective, efficient and equitable global deal in Copenhagen.

Published: 2009 | By: UNEP FI

Demystifying Responsible Investment Performance (1.2 MB | 82 pages)

A constant barrier to the widespread acceptance of responsible investment has been the misconception that it automatically translates to underperformance. This has been the subject of much debate through the years, particularly in the context of fiduciary duty.

The report, jointly produced by the UNEP FI Asset Management Working Group and Mercer, a leading global provider of investment consulting services, features influential and award-winning studies from the academic community and a diverse set of studies from renowned brokerage firms, analysing responsible investment performance at both the company/stock and fund/portfolio level, and bolstering the materiality of environmental, social and governance (ESG) factors.

The landmark report dispels misconceptions surrounding responsible investment performance, encourages more in-depth academic and practitioner research, and represents another enlightened step towards exploring the challenges and promise of responsible investing.

Published: 2007 | By: UNEP FI and Mercer

The Working Capital Report (590 KB | 56 pages)

Responsible investment matters because we are talking about where people's savings meets society's goals.

By July 2007 assets approaching USD 10 trillion, owned or managed by more than 200 major investment organizations from 25 countries, had committed to the Principles for Responsible Investment.

In the future this commitment by investors to the PRI could have a huge impact on the way capital markets work and indeed on how we collectively address the pressing global social and environmental issues of the 21st century.

The Working Capital Report is a snapshot in time describing how the PRI came about and capturing the views of leading thinkers in the field of sustainable finance and responsible investment.

Published: 2007 | By: UNEP FI and UN Global Compact

Responsible Investment in Focus: How leading public pension funds are meeting the challenge (1.0 MB | 85 pages)

A wide range of issues that five years ago were considered "non-financial" such as climate change, human rights and board remuneration are now coming to the fore as factors that can have a significant impact on investment value. Many investors, particularly pension funds with a remit to take a long-term perspective, are grappling with these issues, and there can be both hesitation and confusion as to how to integrate them in investment decision-making.

This report contains 15 case studies offering a snapshot of some of the most advanced approaches to responsible investment around the world. It is intended to serve as practical guidance for the institutional investment community, particularly trustees of pension funds, foundations and life insurers, and their agents, on how and why leaders integrate environmental, social and governance considerations into their investment processes.

Published: 2007 | By: UNEP FI

Unlocking Value: The scope for environmental, social and governance issues in private banking (320 KB | 26 pages)

This publication addresses the question of why responsible investment has at best been modest in private banking compared to the surge it has experienced in institutional asset management.

It analyzes private clienteles’ potential demand for responsible investment products, the special characteristics of the wealth management industry and the barriers to the further uptake of ESG-inclusive investment strategies in private banking.

Finally, a resulting set of recommendations is presented for the expansion of ESG-inclusive investments, aimed also at the executive level of private banking institutions.

Published: 2007 | By: UNEP FI

Show Me The Money: Linking Environmental, Social and Governance Issues to Company Value (516 KB | 60 pages)

This publication marks the second iteration of work produced by UNEP FI Asset Management Working Group (AMWG) on the financial materiality of environmental, social and governance (ESG) issues. For this round, the AMWG invited ten sell-side brokerage houses to write reports across sectors and issues. Analysts were given a free hand to cover the areas they felt to be the most important. CRA RogersCasey, a US-based investment consultancy firm, was also invited to comment on whether the documented ESG links to financial value in the research submitted were strong enough to make a convincing case for mainstream investors.

Published: 2006 | By: UNEP FI

A legal framework for the integration of environmental, social and governance issues into institutional investment (1 MB | 154 pages)

The UNEP FI Asset Management Working Group (AMWG) invited Freshfields Bruckhaus Deringer, one of the world's largest law firms, to consider whether institutional investors such as pension funds and insurance companies are legally permitted to integrate environmental, social and governance issues into their investment decision-making and ownership practices. The AMWG further asked how the law might be expected to evolve in this area. The study describes the legal framework for institutions in Australia, Canada, France, Germany, Italy, Japan, Spain, the UK and the US.

Published: 2005 | By: Freshfields Bruckhaus Deringer

Generation lost: young financial analysts and environmental, social and governance issues (439 KB | 6 pages)

Executive Summary of a joint project between the World Business Council for Sustainable Development (WBCSD) Young Managers Team (YMT) and UNEP FI to assess whether young analysts might be more amenable to integrating environmental, social, and governance issues than their older colleagues.

Published: 2005 | By: UNEP FI / World Business Council for Sustainable Development (WBCSD)

CEO Briefing: The Materiality of Social, Environmental, and Corporate Governance Issues to Equity Pricing (746 KB | 6 pages)

The UNEP FI Asset Management Working Group invited stock brokerage firms for an analysis of seven industry sectors. Analysts were requested to identify specific environmental and social criteria likely to be material for company competitiveness and reputation in those sectors, and, where possible, to quantify their potential impact on stock price.

This is a distilled version of the full report (PDF: 1.1 MB), including the key results of this study, and its recommendations and conclusions.

Published: 2004 | By: UNEP FI

The Materiality of Social, Environmental, and Corporate Governance Issues to Equity Pricing (1.1 MB | 54 pages)

The UNEP FI Asset Management Working Group invited stock brokerage firms for an analysis of seven industry sectors.

The analysts were requested to identify specific environmental and social criteria likely to be material for company competitiveness and reputation in those sectors. We also asked the analysts to the extent possible to quantify their potential impact on stock price.

This report documents the results of this study, and its recommendations and conclusions.

Published: 2004 | By: UNEP FI

The Asset Management Working Group: What, Why, Who? (265 KB | 6 pages)

A group of UNEP FI signatories have constituted an Asset Management Working Group to explore whether environmental, social, and corporate governance considerations are sufficiently incorporated in asset management.

This publication introduces the member companies and provides an introduction to their work.

Published: 2004 | By: UNEP FI

The State of Responsible Investment in South Africa (1.5 MB | 69 pages)

"The State of Responsible Investment in South Africa" is a survey of the approaches and perceptions of the South African investment community to environment, social and governance issues. 32 pension funds, 19 asset managers, and 11 investment service providers were surveyed on current demand and supply of responsible investment as well as whether they felt issues such as employee relations, sustainability, HIV Aids and corporate governance were important to consider when evaluating the performance of investments.

Findings are important for both South Africa as well as the larger African context. The South African stock exchange is the biggest in Africa and South African investment activities, trends and behavior are vitally important to the economies throughout the continent. It is arguably in the African continent, where acute ESG pressures exist, that the benefits of responsible investment could have most impact.

Published: 2007 | By: UNEP FI

The Principles for Responsible Investment Launch Document (Français) (205 KB | 12 pages)

Background on the 6 Principles, their possible actions for signatories, and an extensive FAQ.

Published: 2006 | By: UNEP FI