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PRI, UNEP FI, Generation launch ESG fiduciary-duty initiative

The Principles for Responsible Investment (PRI), the United Nations Environment Programme Finance Initiative (UNEP FI) and the Generation Foundation have launched an initiative to integrate sustainability into investors’ fiduciary duties.

Launched in New York, the project has a three-year time frame and will engage asset owners, asset managers and policymakers across national and international jurisdictions to “harmonise a global understanding of fiduciary duty that incorporates sustainability”, according to statement from the organisations.

One of the programme’s key aims is to develop an international statement on fiduciary duty and sustainable development, “which would create a cohort of signatories committed to integrating sustainability into their fiduciary duties”.

The project also aims to encourage governments and regulatory agencies in eight jurisdictions to clarify the scope of fiduciary duty “such that investors must take explicit account” of environmental, social and governance (ESG) issues in their investment practices and proactively engage with companies on these issues.

The eight jurisdictions are: Australia, Brazil, Canada, Germany, Japan, South Africa, the UK and the US.

They were the countries covered in a report on fiduciary duty published by UNEP, PRI and the UN Global Company in 2015.

The new initiative also aims to extend the report’s analysis to key Asian markets.

Commenting on the new project, Fiona Reynolds, managing director at PRI, said “outdated perceptions about fiduciary duty persist, and many investors have yet to integrate ESG issues systematically into their investment decision-making processes”.

Eric Usher, acting head of UNEP FI, said the groups’ aim was “to catalyse global regulatory best practice by clarifying that investors should consider material sustainability factors in their investment processes”.

At the EU level, the campaign to integrate ESG in pension funds’ investment considerations appears to have received a boost, with the European Parliament’s Economic and Monetary Affairs Committee in late January voting in favour of amendments to the IORP Directive that included language on environmental risk assessment.

Trilogue negotiations on IORP II begin next week.

Still, enshrining ESG in fiduciary duty remains high on several bodies’ agendas.

The UN-backed PRI has called on the European Commission to see its Capital Markets Union project as an opportunity on this front, while the UNEP has suggested the UK pensions regulator clarify that fiduciary duties require attention to sustainability factors “through amendment of the occupational pensions regulation”. 

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