Taking Responsible Investing Seriously

Responsible investing continues to grow up, go mainstream. In September, three events--the publication of two reports and the launch of a new investment product--highlighted the diverse ways in which it's doing so.

Early in the month the UN-backed Principles for Responsible Investment (UNPRI) published its Annual Report on Progress. As this is the fifth year that the six principles have been in place, UNPRI took the opportunity to look back, to review the evolution of responsible investing since the principles were launched in 2006 at the New York Stock Exchange by then-Secretary General of the UN, Kofi Annan.

What's changed? According to those who have been signatories since the start, being party to the PRI has fostered improved transparency and clarity of reporting on environmental, social and governance (ESG) issues, both on the part of asset managers and the companies they invest in, it has bolstered asset managers' willingness to engage as active owners on ESG issues, and it has fueled increased collaboration between signatories, as champions of the PRI specifically and effective ESG monitoring and reporting generally.

As for the pace of adaptation? Signatories to the principles are up 30% from August 2010 to 2011. Now, over 900 asset owners and investment managers who oversee over $30 trillion in assets--invested globally in public and private equity, real estate and fixed income--are party to the principles. In September über-mainstream US behemoth PIMCO--with more than $1 trillion under management--signed on.

Just after UNPRI released its annual report, the UK-based non-profit Forum for the Future published Sustainable Economy in 2040: A Roadmap for Capital Markets. Produced at the request of the $400 million asset management arm of the UK insurance company Aviva, Aviva Investors, the document clearly delineates the ties between constructive, large-scale investor commitments and the broader, long-term economic health of society.

Further, it identifies key investment opportunities for all interested asset managers--not just those focused on responsible investing--to target in the areas of food, health, energy, mobility and finance, in order to carve a path to a viable, sustainable future, globally. The report is an empowering one, pushing all investors to think more broadly--and responsibly--about the profoundly positive impact that carefully considered capital allocation decisions can have on our collective well-being.

Finally, late in the month, the launch of GIIRS (pronounced gears), the Global Impact Investment Ratings System from B Corporation. An ongoing challenge for those interested in pursuing responsible investing? Obtaining clear, consistent, comparable data by which to assess companies' and funds' real ESG performance. Backed by support from Deloitte, Prudential and the Rockefeller Foundation, GIIRS is in the early stages of delivering a product that addresses this very real need. For now, GIIRS ratings are only available in the private market. GIIRS' ultimate ambition? To catalyze $1 trillion in impact investment over the next ten years--across private and public markets alike.

Large-scale, accelerating rates of commitment, positive vision, objective metrics--these are powerful developments for a segment of the investing world that has, in the past, frequently been shunted to the side, orphaned or ghettoized--and proven unable to punch back by showcasing an army of advocates, a broadly compelling raison d'être or tools for investors to use, in order to engage with ease. September presented us with more evidence: responsible investing is ready to be taken seriously.

Aviva Investors' London CEO, Paul Abberley, has been an unusually outspoken critic of investors' failure to pay attention to the role their decisions play in affecting environmental degradation. On October 20th he will speak in Washington, DC at the two day conference The Tipping Point: Sustained Stability in the Next Economy sponsored by the UN Environment Programme Finance Initiative. Nasim Taleb and Gordon Brown will keynote. Registration details are here.

Aviva has also been a partner to UNPRI in its efforts to encourage stock exchanges around the world to require better ESG disclosure from listees. The next Sustainable Stock Exchange Global Dialogue will be held in conjunction with the UN Earth Summit in Rio in June 2012. The initiative has been selected as a finalist for a Katerva Award. Winners will be announced December 7, 2011 in New York.