The US is the world’s largest capital market, and American investors are increasingly focused on long-term investment approaches that require the inclusion of environmental, social and governance (ESG) factors.

The US is also the PRI’s single largest market with more than 345 signatories and US$36 trillion in assets under management. In recent years, we have seen US policy makers and regulators seek input on or adopt policies that help promote or support long-term value creation.

Demand for responsible investment is rooted at the investor level, where many US asset managers and owners have embraced, embedded and endorsed ESG incorporation as vital for achieving long-term value creation and a sustainable financial system. According to the US SIF, socially responsible investments increased by 33% to more than $8.5 trillion from 2014 to 2016. Also promising is that 30% of corporate retirement plans now incorporate ESG factors into their investment decisions.

Recent investor-led developments demonstrate the level of support and momentum across the country to manage long-term risks and generate value. For example, we saw significant progress on active ownership in 2017. Shareholders of Exxon Mobil and Occidental Petroleum voted in favor of requiring greater disclosures related to climate risks. Several states, localities and other entities have also committed to the Paris Climate Agreement, seeing the clear investment risks related to climate change and the need for supportive policy environments for long-term investor returns.

This briefing discusses recent policy developments – particularly around fiduciary responsibilities, stewardship and financial disclosures – that could, or perhaps already have, impacted ESG integration in the US. It is not intended to be comprehensive, but is a starting point for discussions with our signatories on the PRI’s policy views and US engagement strategy.

Highlights of the briefing include:

  • Support for recent Labor Department (DOL) policies acknowledging that ESG issues can contain financial value and that retirement plan fiduciaries may take ESG factors into account when exercising their right to vote.
  • Concern with legislative efforts, such as the Financial CHOICE Act, that could weaken the ability of shareholders to engage with companies and fellow investors on corporate governance and risk management.
  • Calls for increased ESG-related disclosures to enable investors to make more informed decisions about longterm value creation that can support a more sustainable financial system.

While the majority of the PRI’s policy efforts in the US have been focused at the federal level, several state and local public pension systems have committed to ESG integration. As part of the Fiduciary Duty in the 21st Century project, we intend to take a deeper dive into ESG integration at the state level in 2018.

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    Responsible investment policy in the US

    January 2018