A key report has been published by the Principles for Responsible Investment (PRI) and other ESG-focused organisations on how investors may be legally bound to tackle sustainability challenges, and concludes that, in many cases, they are.
The document entitled “A Legal Framework for Impact”, commissioned by the PRI alongside The Generation Foundation and the United Nations Environment Programme Finance Initiative (UNEP FI), and written by law firm Freshfields Bruckhaus Deringer, is the result of work initiated two years ago.
The organisations say it provides “the first ever comprehensive analysis of how far the law requires or permits investors to take deliberate steps to tackle sustainability challenges in discharging their duties, described as investing for sustainability impact.”
David Blood, senior partner at Generation Investment Management – the firm co-founded by former US vice president Al Gore – said of the report’s authors: “What they found is, investors can invest for sustainability impact, and in many cases they’re required to do so.”
Jurisdictions covered in the report are Australia, Brazil, Canada, China, the EU, France, Japan, The Netherlands, South Africa, the UK and the US.
While there are differences across jurisdictions and investor groups, the organisations said the report found where investing for sustainability impact approaches could be effective in achieving an investor’s financial goals, the investor would probably be required to consider using them and act accordingly.
The report also comes up with options, rather than recommendations, for policymakers looking to facilitate investing for sustainability impact, the organisations said yesterday.
These options include changing investors’ legal duties and discretions – such as allowing the pursuit of sustainability goals as long as financial return goals are prioritised – and a presumption in favour of investor collaboration in tackling sustainability challenges, they said.
Inger Andersen, executive director of UNEP, said what was needed was an updated financial system that was fit for purpose.
“At present, many leading responsible investors feel constrained by current financial and legal frameworks that were not originally designed to facilitate today’s sustainability goals,” she said.
Meanwhile, David Rouch and Juliane Hilf, partners at Freshfields and the report’s main authors, said: “If it was ever possible to approach the goal of earning a financial return in isolation from other valued goals, that time is not now.”
They said the report addressed a vital issue for investors “at a time of pressing need to join in tackling humanity’s greatest challenges”.
PRI, UNEP FI and The Generation Foundation said the report was expected to form the basis of a three-year programme they would undertake,
That upcoming work would, they said, focus on five key jurisdictions to help foster legal and regulatory environments that were equipped to meet global sustainability imperatives.
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- Asset Managers
- Climate change
- Corporate governance
- fiduciary duty
- Freshfields Bruckhaus Deringer
- Generation Investment Management
- Impact investing
- Investor Strategy
- Principals for Responsible Investment
- Regulation and legal
- The Generation Foundation
- UNEP FI
- United Nations Environment Programme