Another Global Compact for investments? Good and bad news

kulsumkhatun997

News headline: For the UN, CSR should be a legal matter Subheadline : A new study conducted on behalf of the United Nations Environment Program Finance Initiative concluded that environmental, social and governance issues are not only moral issues but also legal ones. Reality: A study carried out by a law firm, with the approval of the Financial Initiative, of the United Nations Environment Program, UNEP,  recommends that institutions that manage investments in capital markets (let's call them investment advisors and managers) take into account in their investment decisions the environmental, social and governance (let's call them ESG) aspects of the companies in which they invest. They recommend that taking them into account be a legal obligation for advisors/managers since otherwise they could be accused of negligence in the performance of their duties. The study also recommends that the consideration of these ESG aspects be included in fund administration contracts and make it a legal obligation for ADVISORS/MANAGERS. Do you understand, as the headline says, that CSR should be a legal matter? Or, as he suggests, that it be mandatory for companies? Do you understand that, as the subheadline says, the report recommends that environmental, social and good governance issues are not only moral issues but also legal ones for companies? In other words, they should not be voluntary but mandatory? NO.

The study only refers to the considerations of Phone Number List ESG aspects by advisors/fund managers when making third-party money investment decisions. The study does not talk about the obligation of CSR, not even for companies (in fact they call these “responsibilities” ESG and not CSR), nor does it talk about moral versus legal obligations of companies. Nor is it “the UN”, a term that usually refers to the General Assembly of the United Nations, where the member countries are represented, but is an administrative agency, UNEP, dependent on the Secretary General. The news headline and subheadline seem to reflect more what the journalist would have liked the study to say. The UNEP Finance Initiative together with the Global Compact have coordinated the development of responsible investment principles, managed by a privately led organization,  similar to the Equator Principles of the International Finance Corporation of the Bank Global, and similar to the Global Compact of the United Nations itself. There are six principles that establish everything from the commitment to take ESG aspects into account to reporting how they have been considered. They are voluntary and considered an aspiration. Similar to the Global Compact. With this, the adherents want to demonstrate to the public that they are concerned about ESG aspects.



To date, 578 institutions have joined, including investors, managers and advisors. What supervision does UNPRI do of the implementation of the principles by adherents? None. Is there an obligation to report? Yes, for 464 of the adherents there is an obligation to complete a 100-question questionnaire, but few report to the UNPRI and even fewer make the report public. For the year 2008 they reported 276 adherents  advantage of publicity and then few implement or at least publish what they do. Fortunately, as in the Global Compact (see our article on the Global Compact on the bloible Investment Principles that they helped create? Or maybe the study is part of the pressure. It must be admitted that it is a good start. There are few who can commit to basing their decisions on something undefined, unclassified, such as ESG aspects. Some responsible investment funds, created for that specific purpose, can do so. Perhaps the UNPRI should limit itself to these funds that commit to implementing, not just considering, ESG aspects and not accept everyone who wants to join. The Responsible Investment Principles initiative is very good. I wish all investors applied them. It is a very powerful instrument to stimulate responsible practices in companies, much more than the Global Compact.