UNEP FI Asset Management Working Group The - UNEP Finance ...

As an example of good practice by investment consultants, McQuillen referred to the answer provided by
Mercer to the question, "Do you consider that integration of ESG matters is a requisite aspect of investment
management as part of fiduciary duty?"
Mercer's response was, "Yes. An increasing body of evidence exists to show that ESG factors can impact
investment performance. Therefore, fiduciaries concerned with long-term preservation and growth of capital
should have some understanding of how ESG factors may affect their portfolios."
The third section of the report finds that while laws regarding fiduciary duty have changed little since the
Freshfields report, "many institutional investors are beginning to see their fiduciary duty as allowing for, or even
requiring, a more sustainable investment approach." The section examines several initiatives among pension
plans and institutional investors that explicitly incorporate ESG issues into their processes, and cites numerous
studies that provide guidance for institutional investors wishing to do so.
The third section of Fiduciary II also describes the integration of ESG criteria into new asset classes, such as
private equity and property investment, and financial sectors such as insurance.
Butch Bucani, Program Officer for Insurance and Investment at UNEP, and the Fiduciary II Project Manager and
Chief Editor, said, "Many leading institutional investors are adopting longer-term and more responsible and
sustainable investment strategies, and in fact are moving toward greater integration of ESG issues into overall
investment philosophy and practice."
Bucani continued, "In order to achieve the original vision of the Freshfields report, ESG issues should be
embedded into the legal contracts between asset owners and asset managers. The report makes the case that
asset managers have a duty to proactively raise ESG issues with their clients."
He concluded, "Taking ESG issues into account will align institutional investors with the interests of society."
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