PRI looks at investor obligations and duties in six Asian markets
New study follows on from 2015 report: Fiduciary duty in the 21st century
Singapore, 7 September 2016. The Principles for Responsible Investment (PRI), UNEP FI and the Generation Foundation today announced a new publication looking at investor obligations and duties across six Asian markets: Singapore, South Korea, India, China, Hong Kong and Malaysia. The report was launched at a session during PRI’s annual conference, PRI in Person, the world’s largest responsible investment event.
In January 2016, PRI, UNEP FI and The Generation Foundation launched a three-year project to clarify investors’ obligations and duties in relation to the integration of ESG issues in investment practice and decision-making. This included extending the research approach and analysis of Fiduciary Duty in the 21st Century to Asia, published last year.
Policy makers, investors and stakeholders interviewed for this report identified five main barriers to ESG integration:
- diverging views on how to define ESG issues;
- A perception that integrating ESG factors will compromise investment performance;
- Difficulty in engaging companies on ESG factors, given the structure of the corporate sector e.g. many large companies being family-run;
- Few regulatory mechanisms requiring investors to integrate ESG factors or report on sustainability issues; and
- Low-quality ESG disclosure by companies.
Based on a review in each country of investment practice, current regulation and over 50 interviews with policy makers, investors and stakeholders, this report makes recommendations for investors and policy makers. See link here to the full report.
“Fiduciary duty is still the biggest barrier to ESG integration,” said Fiona Reynolds, managing director of the PRI. “In many Asian markets, responsible investment remains a nascent concept; however, we have seen momentum growing of late, which is why it’s vital that investors and policymakers work together to ensure sustainability issues keep moving forward across the region.”
Notes to editors:
The key messages of the report include:
- In all six markets, there are compelling national interest reasons for policy makers to promote the incorporation of environmental, social and governance factors into investment practice.
- Investing prudently requires considering ESG factors in investment decision-making. This is consistent with the legal framework in all the markets studied in this report.
- However, despite growing awareness of responsible investment, many investors have yet to fully integrate ESG factors into their investment decision-making processes.
- By working together, policy makers and investors can shape investment frameworks to clarify the obligations and duties investors owe to beneficiaries.
- This report aims to bridge the needs of policy makers and investors to support the integration of ESG factors in China, Hong Kong, India, Malaysia, Singapore and South Korea.
- Policy makers could consider clarifying investor duties, introducing stewardship codes, strengthening corporate disclosure requirements and, through the actions of sovereign wealth funds, leading by example.
About the Principles for Responsible Investment (PRI)
The United Nations-supported Principles for Responsible Investment (PRI) is an international network of investors working together to put the six Principles for Responsible Investment into practice. Its goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. In implementing the Principles, signatories contribute to the development of a more sustainable global financial system.
About the UNEP FI
The United Nations Environment Programme Finance Initiative (UNEP FI) is a public-private partnership established between the United Nations Environment Program (UNEP) and the financial sector. It counts over 200 members among leading banks, investment funds, and insurance companies. The UNEP FI seeks to encourage the better implementation of sustainability principles at all levels of operations in financial institutions, namely through the incorporation of environmental, social and governance factors (or ESG) in risk analyses - a concept it pioneered in the 1990s.
About the Generation Foundation
The Generation Foundation ('The Foundation') is the advocacy initiative of Generation Investment Management ('Generation'), a boutique investment manager founded in 2004.
The Foundation was established alongside Generation in order to strengthen the case for Sustainable Capitalism. Its strategy in pursuit of this vision is to mobilise asset owners, asset managers, companies and other key participants in financial markets in support of the business case for Sustainable Capitalism, and to persuade them to allocate capital accordingly.