Sustainable Investment in China | Principle 5: We Will Work Together to Enhance Our Effectiveness in Implementing the Principles

Many environmental, social, and corporate governance (ESG) issues are too large and complex for any one investor to solve alone. Therefore, collaboration—through forums like the PRI Clearinghouse (see Q2 2010 of newsletter) and other key industry initiatives—has become a key part of responsible investment implementation.

Collaboration for investors means working together to influence investee entities and policy makers by sending a unified signal on the importance of properly managing ESG issues. In the PRI’s 2010 survey, approximately 90 percent of signatories reported that they collaborate with other investors through formal investor initiatives or informal networks—a rise from 75 percent in 2009—and 223 (of 433 survey respondents) reported that they undertake specific collaborative engagements with other PRI signatories.

For example, a group of 16 institutional-investor signatories with approximately US$1.5 trillion in assets under management (AUM) worked together to engage with companies on water challenges. The investors sent a letter to a select group of companies asking them to endorse the CEO Water Mandate. As current and potential shareholders of these companies, the investors encouraged companies to consider the significant value of becoming a participant in the CEO Water Mandate. Such action from investors is now increasingly common, and is gaining a response from businesses. In this case, in the two years after the letter was sent, 19 of the 100 companies targeted have signed up to the CEO Water Mandate.

WORKING TOGETHER AT A POLICY LEVEL

Investors are also working together to shape policy. In December 2010, for instance, more than 260 investors—both asset owners and investment managers—with US$15 trillion AUM signed a statement informing the world’s policy makers of their concerns with the risks presented by climate change to regional and global economies and to individual assets. While investors worldwide are currently taking actions on their own to address climate risks and opportunities—such as considering climate risks in their existing investments; investing in assets such as renewable energy, energy infrastructure, and clean technology; pressing companies to reduce their greenhouse gas emissions; and persuading regulators to require corporate disclosure of the business impacts of climate change; among other initiatives—these efforts must be scaled up dramatically to reach the levels needed to achieve a global, low-carbon economy.

The investors supporting the statement came from various networks, including the Institutional Investor Group on Climate Change, Investor Network on Climate Risk, Investor Group on Climate Change, and the UN Environment Programme Finance Initiative. By forming a significant global group of investors, a more effective and consistent voice was presented, which ultimately helped lead to an agreement in Cancún, Mexico, for a Green Climate Fund and long-term financing commitments.

The motivation for participating in collaborative initiatives is not limited to increasing investor power and effectiveness. Investor groups are able to reduce their resource requirements through economies of scale, share the risk burden, and develop close relationships with their peers. PRI signatories believe they can achieve more by working with others, and the PRI Initiative demonstrates why this is true. 

For more information, please contact Joshua Kendall at joshua.kendall@unpri.org