Investing for the Environment? The Limits of the UN Principles of Responsible Investment

The responsible investment practices of the world's largest government sponsored investment funds

“…Unlike private investors such as mutual funds or investment banks, public pension funds are in fact beholden to particular governments whether it be at the nation-state or sub-national level (Gray 2009). As a result, state-mandated investors are subject to the particular preferences, goals and objectives underlying decision making within their respective domestic authority structure, decision making which is not insulated from the public judgment , Gray 2009). Furthermore, both SWFs and public pension funds tend to be long term, conservative global investors.…”

“…Although this is still a point of contention, particularly in the US, the Freshfields Report (2005) argued that ESG considerations does not violate the duty as long as they are motivated by proper purposes and do no adversely affect the financial performance of the entire portfolio. such as CalPERS, or Sweden's AP Funds were early adopters of investment strategies, which relied on new criteria (ESG) that were not previously considered to be financially relevant in investment decision-making (Gray 2009). As of April 2012, over 1000 investment institutions were PRI signatories with AUM of approximately US$ 30 trillion (UNPRI 2012).…”

“…A similar logic can be transposed to fund adoption of the UNPRI. International private initiatives such as the UNPRI are not under the helm of any state and can't resort to a sovereign authority as a source of rulemaking (Gray 2009). Nonetheless, public pension funds and sovereign wealth funds are in fact state mandated actors.…”

“…This thesis studies the factors that increase the propensity o f government-sponsored investment funds (GSIF) to integrate environmental, social and governance (ESG) considerations, into their investment decision-making process. Over the last 30 years, the increased utilization of financial markets as a repository of national and personal savings has led to a domination of the financial markets by large institutional investors (Gray 2009). The most important class of institutional investors are public pension funds given their broad constituencies and their long-term investment horizon (Clark and Hebb 2005).…”

Voluntary Sustainability Codes of Conduct in the Financial Sector

“…Some scholars opine that members sign up to the principles for aesthetic reasons, knowing that becoming a signatory allows them to publicly demonstrate their commitment to responsible investment and to increase their reputation. Other scholars even question the robustness of the principles, and whether they address the more pressing sustainability challenges the world is facing (Gray 2009).…”