We highlight the outcomes and takeaways from COP22, which was designed to build the foundations that would allow the pledges of the Paris Agreement to be put into action.

Related to this, we look at economic inequality. The debate on inequality parallel those of climate change: in terms of responsible investment, inequality is emerging as a central issue of the ‘S’ in ESG factors as climate risk is to the ‘E’. This subject has been on economists’ radars and is a significant political and social concern around the world. We are increasingly seeing the rise of populism and fragmentation, notably with two major events in 2016: Brexit and the US political election. Therefore, examining how and why investors might respond to economic inequality is crucial. We’re proud to be collaborating on this with the Initiative for Responsible Investment at Harvard’s Kennedy School. 

While human rights cannot be considered a frontier issue, social issues have historically received less attention from investors than environmental and governance matters. We investigate the perception that it is difficult to measure and assess human rights issues or to link them to risk and return. There has been growing interest from PRI signatories along with requests to expand our work on human rights, inequality and labour standards. This reflects the growing prominence of social issues and the evolution of international standards such as the UN Guiding Principles and regulatory initiatives. It is demonstrated by significant investor interest in initiatives such as the UN Guiding Principles Reporting Framework, the Corporate Human Rights Benchmark, and participation in the PRI-coordinated engagement on human rights in the extractives sector. This has attracted support from 50 investors with $8 trillion in assets under management.

The article reports on two recent events that will frame research that will study the impact of corporate human rights policies, due diligence processes and external human rights-related issues and events on company valuations. ‘Values to valuation’ is a partnership with the University of California, Berkeley and the University of Manchester, and it will seek to understand the interplay of salience, materiality and financial performance.

In the same vein, this edition also brings together academic papers that explore the impact of ESG issues on returns and the volatility of stock performance. The final article focuses on finance technology, fintech, and the challenges and opportunities that lie ahead in this exciting and uncertain part of the financial world during 2017.

Many of us will be treading lightly into 2017, cautiously assessing the significant political and economic changes that we are witnessing unfold. Inevitably some of this will impact on the issues and areas that this RI Quarterly covers, but what this edition highlights is the fascinating on-going quantitative and qualitative research and debate that is developing in these areas of study. This can only be of benefit to all those interested in responsible investment.

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    RI Quarterly vol. 10: The next frontier for responsible investment

    January 2017