UNEP FI Asset Management Working Group The - UNEP Finance ...
UNEP FI Asset Management Working Group The - UNEP Finance ...
UNEP FI Asset Management Working Group The - UNEP Finance ...
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THE GREEN PAGES<br />
August 2009<br />
Build a good green economy – or get sued<br />
"As investors return to the markets, the question remains whether the<br />
funds will only go to the brown economy of yesterday - or to a new Green<br />
Economy," says Achim Steiner, UN Under-Secretary-General and <strong>UNEP</strong><br />
Executive Director.<br />
But a powerful group of asset managers, representing around USD 2<br />
trillion in assets under management, are arguing that green investment is<br />
no longer just a luxury, but a legal responsibility.<br />
<strong>The</strong> case, outlined in a new report, Fiduciary Responsibility - Legal and Practical Aspects of<br />
Integrating Environmental, Social and Governance Issues into Institutional Investment, with the<br />
United Nations Environment Programme (<strong>UNEP</strong>), underlines how the world's largest institutional<br />
investors -such as pension funds, insurance companies, sovereign wealth funds, mutual funds<br />
and foundations -have a central role in assisting the transition to a low carbon and resource<br />
efficient Green Economy.<br />
However, investors have a legal obligation to raise environmental, social and governance (ESG)<br />
considerations or face legal repercussions. "In tendering for investment mandates, it would be<br />
expected that the investment consultant or asset manager would raise ESG considerations as an<br />
issue to be taken into account and discussed with the client even if the pension fund had not<br />
specified ESG considerations as material to the tender," says Paul Watchman, principal author of<br />
the original 2005 "Freshfields Report", the prequel to this new Fiduciary Report. "If the<br />
investment consultant or asset manager fails to do so, there is a very real risk that they will be<br />
sued for negligence on the ground that they failed to discharge their professional duty of care to<br />
the client by failing to raise and take into account ESG considerations." He emphasises that<br />
financial professionals on all levels need to "proactive" on the relevant issues of ESG.<br />
<strong>The</strong> original "Freshfields Report", was one of the first legal interpretations of ESG issues in the<br />
context of fiduciary law in nine major capital market jurisdictions, and is considered by key<br />
opinion formers in the investment industry as the single most effective document for promoting<br />
the integration of ESG issues into institutional investment.<br />
Financial institution and government bodies are recognising the need to marry fiscal responsibility<br />
with ESG issues on both a macro and micro level. "By virtue of our long-term investments in a<br />
large number of the world's companies, we have a responsibility for and an interest in promoting<br />
good corporate governance and safeguarding environmental and social concerns," says Kristin<br />
Halvorsen, the Norwegian Minister of <strong>Finance</strong> who wrote the Foreword for the report.<br />
Source: <strong>UNEP</strong><br />
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