A legal framework for considering sustainability impact in investor decision making
It is crucial that assessing and accounting for the sustainability impact of investment decision making becomes a core part of investment activity. That is why the PRI, UNEP FI and The Generation Foundation launched A Legal Framework for Impact, to understand how investors in major jurisdictions can manage their fiduciary and impact duties within existing legal frameworks, and what happens if they are in conflict. In some cases, it will recommend policy change.
Investors have a fiduciary duty to integrate financially-material factors, including environmental, social and governance (ESG) factors, in their investment decisions. Meanwhile, the Paris Agreement and UN Sustainable Development Goals have ramped up investor awareness about global sustainability challenges, with investors increasingly thinking about their impact duties, such as decarbonisation targets.
While there are emerging pockets of excellence in technical understanding, fundamental legal questions remain which the project aims to address, including:
- Are there legal impediments to investors adopting “impact targets”—for example—that an investor’s investment activity is consistent with no more than 1.5 degrees of warming?
- Are investors legally required to integrate the sustainability impacts of their investment activity in their decision-making processes?
- On what positive legal grounds could or should investors integrate the realisation of the SDGs in their investment decision-making?
In October 2019 the PRI and UNEPFI appointed a leading law firm to analyse whether and how legal frameworks allow for investors to consider sustainability impact across 11 jurisdictions: the EU, Australia, Brazil, Canada, China, France, Japan, South Africa, the Netherlands, United Kingdom and the United States. The project reference group of experts will also support and test the legal analysis.
The research will provide recommendations for policy change where legal analysis determines that legal impediments are restrictive for investors seeking to incorporating sustainability impact in their investment decision-making.
Join the Reference Group
The project’s Reference Group includes experts from investment firms that have developed, or are in the process of developing, a strategy for integrating sustainability impact considerations in their firm’s core strategy and investment decision making.
The group supports the research by sharing policy developments, questions, concerns and information on legal, regulatory and fiduciary implications of the management of sustainability impact in investment practice.
- Clara Barby, Chief Executive, Impact Management Project; Bridges Fund Management
- Joanne Etherton, Lawyer, ClientEarth
- Gerard Fehrenbach, Attorney at Law | Senior Advisor, Responsible Investment, PGGM Investments
- Sean Gilbert Director, Global Impact Investing Network
- Daniel Jackson, Managing Director, Goldman Sachs Asset Management (GSAM)
- Martin Jonasson, General Counsel, AP2
- Ryan Klausing, Director, Legal Team, Generation Investment Management
- Libby Klein, Trustee Director, Christian Super
- KONG Wei, Partner, Zhong Lun Law Firm
- Susan Mac Cormac, Partner, Morrison & Foerster
- Tom Tayler, Senior Counsel, Aviva Investors
- Tara Tilbury, Senior Counsel, RBC Global Asset Management (U.S.) Inc.
- Michael Torrance, Chief Sustainability Officer, Associate General Counsel, Legal and Regulatory Compliance, BMO Financial Group
- Margaret Wachenfeld, Managing Director, Themis Research; Senior Research Fellow, Institute for Human Rights and Business
- Daniel Wiseman, Lawyer, ClientEarth
Please contact Will Martindale, Director of Policy & Research, PRI, if you are interested in getting involved in the project and/or joining the Reference Group.
The PRI’s work on A Legal Framework for Impact is undertaken collaboratively with the UN Environment Programme Finance Initiative (UNEP FI), and The Generation Foundation.