Work Streams

Asset Management Working Group

The Asset Management Working Group (AMWG) is a global platform of asset managers that collaborate to understand the impacts of environmental, social and governance (ESG) issues on investment value, and to promote best practices in responsible investment. The AMWG groups the asset management firms in the investment commission. Our goal is to promote the integration of material ESG issues into investment decision-making and ownership practices as an integral component of investment practice.

Background

Leading to 2003, there was a growing body of evidence from the academic and specialist financial communities on the materiality of ESG issues to the fair value of investments. To make this link ‘real’, the AMWG requested mainstream stock brokerage firms to conduct studies on the materiality of ESG issues to the valuation of securities. This resulted in the landmark report, The Materiality of Social, Environmental and Corporate Governance Issues to Equity Pricing, published in 2004.

The report, Show Me the Money: Linking Environmental, Social and Governance Issues to Company Value ('Materiality 2'), broadened the work on financial materiality, including more sectors and methods. It was produced in 2006 by the AMWG together with global investment consultants, CRA RogersCasey. This was followed in 2009 by the third of the Materiality series The Materiality of Climate change - How finance copes with the ticking clock on how investors integrate considerations of climate change into their asset management practices.

Although the ‘Materiality 1’ project uncovered the strong business case for the consideration of ESG issues in investments, many investors continued to assert that they are legally prevented by fiduciary or equivalent duties from factoring ESG issues in their decision-making. Thus, the AMWG commissioned Freshfields Bruckhaus Deringer, a leading international law firm, for a legal opinion on where the legal responsibility for ESG issues lies in the investment chain. The report, A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment (‘the Freshfields report’) provided assurance to institutional investors that the consideration of ESG issues is firmly grounded within the bounds of fiduciary duty. This landmark report was in 2009 followed by Fiduciary responsibility – Legal and practical aspects of integrating environmental, social and governance issues into institutional investment. The report provides a legal roadmap for fiduciaries looking for concrete steps to operationalise their commitment to responsible investment.

In 2006, twenty of the world’s largest investors convened by then UN Secretary-General Kofi Annan developed the Principles for Responsible Investment (PRI). The process was implemented by UNEP FI and the UN Global Compact. The PRI was endorsed in 2007 by UN Secretary-General Ban Ki-moon. As of April 2011 over 850 investment institutions with assets under management approximately US$ 25 trillion, have committed to implement the Principles for Responsible Investment.

Since the launch of the PRI, the AMWG has continued its seminal research to advance and deepen responsible investment practices across the investment value chain, spanning key topics such as fiduciary responsibility, financial materiality, performance, pension fund strategies and approaches, private banking, and investor-company communication on ESG performance.

Members

Co-Chairs

• Gianluca Manca, Head of Sustainability & Global Non-Profit Business, Eurizon Capital, Intesa Sanpaolo Group
• Dr Julie Fox Gorte, Senior Vice President for Sustainable Investing, Pax World Management Corp.

Current Projects

• Tomorrow’s Capital Markets: - This project aims to map the incentives diverse financial players and institutions have or do not have to integrate ESG into business decisions. The purpose of the study is to explore the current state of affairs, and to elaborate recommendations on how to improve these incentive structures. The project aims to illustrate that, in the way companies are structured today, long-term financial potential is not fully realised.
• CIO Briefing – Measuring and disclosing the carbon intensity of investments and investment portfolios - As investor awareness on the materiality of climate change increases, a growing number of investment institutions are measuring the ‘carbon footprint’ of their funds for purposes of internal analysis and client communication. However, as this issue moves up the agenda, there is no authoritative guidance, or indeed standards, on how investment institutions should conduct and communicate this analysis.
• Corporate governance: Integrating sustainability into corporate board practices - This project aims to illuminate how a company board culture that promotes sustainability can be generated and how ESG factors can remain integrated over time. The main research object is the board of directors of firms, and how these boards incorporate ESG considerations into their strategies and business values. On the basis of literature review and case studies, we intend to extract best practices from this research and, in doing so, contribute to the growing research on this topic.

Contact

Elodie Feller
investment [at] unepfi.org