Responsible Investment(RI) as it is understood today – an increasingly mainstream expectation required by international norms and widely endorsed by major investors – see www.unpri.org or www.uksif.org, ASRIA etc – would not exist without generations of active ethical investors using their power as citizens, consumers and investors, to make their points. Often succeeding in having an impact far beyond their size in raising an issue up the media and policymaker agenda.
The 2007 credit crunch and failures in regulation (or the deliberate absence thereof) underpinning the contemporary global financial crisis makes it clear that there is still some way to go before the financial services industry meets all the reasonable needs of its customers and beneficiaries (among whom would be most people reading this) when it invests money on their (our) behalf. PMCRreview article Niaz Alam
Hence there is still much to be said for active groups of smaller deeper/ traditional ethical investors who are often the first to raise key ESG issues – and avoid the downsides when risks become more apparent… So even though the common goal of all RI practitioners is to improve impacts against ESG standards across the board and to mainstream good practice, it is perhaps short sighted to dismiss ethical/moral choices as always a niche/minority activity. The end of 2012 and start of 2013 for instance saw the tax debate originating in the UK spread globally (after many years of diligent campaigning and being overlooked by much of the media except for Private Eye)
- http://www.wired.co.uk/news/archive/2013-03/05/microsoft-danish-billion-dollar-tax-bill http://www.taxresearch.org.uk/Blog/2013/03/02/tax-us-if-you-can-the-new-edition/)
Whilst hugely valuable and influential, ethical choices by individuals, such as choosing an ethical bank account, or buying goods certified as organic or fair trade will almost by definition always at first be a minority choice. There is also often a moral dimension – who is more useful for the good of wider society, an investor who avoids holding shares in a tobacco company because they do not want to profit from the harm inherent in the product, or the citizen who campaigns democratically for the government to discourage use by raising taxes? (One answer by the way is that someone could be both.)
In order to get away from such accusations that ethics are an optional or niche factor, some responsible investors are focusing on integrating ethical factors into mainstream investment choices by for example incorporating reference to international human rights law and ILO conventions within their statements of investment principles. For example the Norway Government pension fund (commonly referred to as the Norway Oil Fund and one of the world’s largest sovereign wealth investors), sold over 350m USD of shares in Wal-Mart in 2006 because it was not satisfied with the company’s responses to allegations that its operations may have breached the spirit of international conventions on labour rights and freedom of association.
This approach has gained widespread endorsement with the growth of the UN Principles for Responsible Investment (PRI), an investor-led coalition that seeks to “help investors integrate the consideration of environmental, social and governance (ESG) issues into investment decision-making and ownership practices across all asset classes and regions…” By the end of 2012, assets reported under management by PRI signatories stood at more than $32 trillion USD ( that is to say 32000 billion USD or 15% of the world’s investable assets).
Some fear that Responsible Investment principles – if not adequately implemented and monitored for example with the help of improved disclosure and transparency (as is indeed now being required by UNPRI,) may be lost in the wider picture or treated as an optional extra- while others such as UKSIF http://www.thecityuk.com/blog/date/2011/07 argue that it is essential that all investors adopt an RI approach as sustainable finance is essential and integral to the necessary global transition to a more resilient resource-efficient economy.
Of course, as with all good intentions, in the long run, it is not the words on paper that count so much as how they are put into practice.
By the way my personal test for that is And the first Bangladeshi fund to sign UNPRI is …Niaz Alam 2014
In brief update:
My involvement with Responsible and Ethical Investment includes working at EIRIS for over 11 years, and serving in senior roles at UKSIF and LPFA. I was also the first non-executive director appointed to the Board of the London Pension Funds Authority specifically with a remit to act as an advisor on human rights and responsible investment issues. As ab independent consultant working with Unite the Union, in 2009, I wrote and helped West Yorkshire Pension Fund to secure support for the 1st UK AGM resolution on labour rights and equal treatment to exceed 10% vote actively in favour.
Since 2017, I have been on the judging panel for Investment Week’s Sustainable and & ESG Investment Awards.