Why invest responsibly?
Client demand and regulation are key drivers of responsible investment. A growing awareness of the financial importance of ESG issues and a desire to show investor responsibility also play a key role.
Client demand
Client demand can be seen in the growth of funds in Eurosif and US Social Investment Forum surveys. Asset owners also drive engagement and other strategies by signing the UN PRI principles, making a statement of their investment principles or asking questions when selecting asset managers.
Legal and related standards
Disclosure regulations for pension or other investments have helped put responsible investment on many agendas. The advice of professional and industry bodies (for example the ISC and ABI in the UK) have also created a climate in which responsible investment is seen as something of relevance to all investors.
Financial implications
Carbon emissions trading, green legislation and the growing need to secure public support for major projects or sensitive operations have all driven interest in how ESG factors affect financial performance. Investors are looking for unmanaged risks, for new ways to assess management quality and for means to value corporate responsibility.
The rise of the responsible financial institution
Many more financial institutions now also see responsible investment as part of their own corporate responsibility. This may simply be about building their own reputation as a responsible actor in the marketplace. But it can also be about maintaining confidence in markets more generally, or about an awareness that if one company does well at the expense of others, a widely diversified investor may well pick up the costs as well as the gains.
