A small but growing number of investors sign the United Nations Principles for Responsible Investment (UNPRI). The initiative connects investors from around the world with a common, powerful idea and six 'principles'. The idea that environmental, social and governance issues are material investment considerations spreads throughout the global investment management industry.
As asset values around the world plummet, all eyes turn to the financial services industry and their practices.
Public pressure to demonstrate a commitment to ESG mounts, but the information needed to make informed investment decisions is scarce.
Confusion over ethical investment approaches dominates public conversation. We commence education programs to help drive innovation in our approach to responsible investment.
The meaning of economic risk has evolved; for the first time, the World Economic Forum’s Global Risk report is dominated by environmental issues. Meanwhile, banking and financial services becomes the least trusted industry in the Edelman Trust Barometer, reflecting public dissatisfaction following persistent scandals. These trends make ESG issues and responsible investment impossible to ignore.
Climate change negotiations get back on track, although policy uncertainty persists. Meanwhile, long-term investors continue to build processes and tools needed to manage the risks posed by a changing climate.
The UK Law Commission Review of Fiduciary Duty puts responsible investment and stewardship firmly back on trustees' agendas. Increasing evidence that good and proper management of ESG issues has a beneficial influence on financial performance further adds to momentum.
A more mature and holistic discussion begins to emerge, with the industry increasingly recognising that broader economic benefits and the expectations of society are relevant and important considerations for long-term investors. Increasing numbers of asset managers globally are looking inward at whether their own ESG practices meet the standards they set for companies. Fund management firms are also increasingly attempting to articulate their RI values and investment beliefs, marking a step change in responsible investment.
The Sustainable Development Goal and the Paris Climate Change agreement set new and positive shared objectives for the planet and development. Significantly, investors are recognised as having a key role in achieving both sets of goals.
Meanwhile, the increasing acceptance - through stewardship codes and changes in regulatory guidance - signal that responsible investment, in all its forms, is the new mainstream. We see a significant increase in demand for responsible investment products. While quality remains highly variable, questions of the legitimacy of RI are finally put to rest.
While the momentum from Paris and the Sustainable Development Goals are maintained, populism, Brexit and the election of Donald Trump as US President cause shock waves for responsible investors. While the issue of growing inequality had been increasingly discussed, the effects of it were unexpected and dramatic.
Following the progress and hope of 2015, 2016 underlined to policy makers, investors and businesses the urgency and size of the challenge of achieving an inclusive and sustainable economy. With RI legitimacy now firmly established, the time has come for responsible investors to shift from belief to action. The first step is to realign our goals with those of society, and redefine performance accordingly.