5. Conclusions and recommendations“Active ownership is critical. Asset ownersshould first identify good standards of activeownership as a criterion in the selectionprocess, then ask fund managers <strong>for</strong> theiractive ownership policies and practicesas part of this process; once selected, theasset owner should monitor these activitiesand ensure that the fund manager deliverson its commitments ” Emma Hunt,Senior Investment Consultant,Towers Watson
THIRTY ONE5.1 IntroductionThe scale of the challenge we face in fullyintegrating poverty reduction and developmentissues into investment practice is immense.The reality is that fully addressing many of thestructural and technical obstacles identifiedin the course of the <strong>Better</strong> Returns in a <strong>Better</strong>World project will take many years and requirehuge levels of political and institutional support.That said, there is much that can – and must– be done within the prevailing structure ofthe investment industry. We believe that theproposals and recommendations set out hereprovide investors with the framework <strong>for</strong> thenext five years’ work on responsible investment.They are challenging but achievable, andshould enable us to move much closer toplacing poverty reduction and development atthe heart of investment practice.REGULATION IN THE INVESTMENTINDUSTRY AT NATIONAL ANDINTERNATIONAL LEVELS IS CRITICALTO DEFINING STANDARDS OF GOODPRACTICE TO ADDRESS THE SOCIAL ANDENVIRONMENTAL CHALLENGES WE FACE.Responsible Investment is a term used todefine investments that take account of social,environmental and governance issues. <strong>Oxfam</strong>’skey interest is in social, environmental andgovernance issues that particularly affectpoverty reduction and sustainable development.For example, when examining a company’smanagement of climate change risks, investorsshould not only consider the company’scommitments to reduce emissions in its operations,but also consider whether and how they aresupporting their suppliers in developing countriesto adapt to increasing climate-related risks.Most of the proposals here follow from ouranalysis of the structural and technical barriersidentified in Section 4. However, be<strong>for</strong>e movingon to the specific proposals, it is important firstto set out our views on the role of voluntary andmandatory (regulatory) processes.We see both as important. Voluntaryapproaches: (a) allow progress to be made inthe absence of regulatory requirements; (b)enable good and best practices to emergeand lessons to be learned; (c) help createmomentum and progress, and (d) are arecognized starting point <strong>for</strong> the developmentof norms (both around investment practice andaround the outcomes that should be soughtfrom responsible investment) that may, overtime, emerge as hard law requirements 51 . Thatsaid, we do not believe voluntary approacheswill deliver all of the outcomes required. If welook at the progress that has been made in theinvestment industry over the past five years,there is much that is encouraging, most notablythe huge increase in the number of institutionalinvestors that have made commitments toresponsible investment. However, it is alsoclear that progress (in particular on povertyand development issues) has not been asfast as we need if we are to make significantprogress towards the goal of poverty reduction.We there<strong>for</strong>e see regulation at the nationaland international levels as critical to definingand en<strong>for</strong>cing standards of per<strong>for</strong>mance (anddealing with free riders), to institutionalising goodpractices and addressing the market failuresthat are at the root of many of the most pressingsocial and environmental challenges that we face.5.2 Addressing the structural barriersIn Section 4.2, we identified three majorstructural barriers to the fuller integration ofpoverty reduction and development issues intoinvestment practice, namely: (a) the lack ofdemand from and oversight by asset owners,(b) short-termism, and (c) the general lack oftransparency in the investment industry. Thesolutions we propose to the first and third ofthese are quite similar and so these barriers areconsidered together.
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