Monday, June 19, 2006

Principles of Responsible Investment

Update 6/19/06    I asked TIAA-CREF my question today.  They say they'll get back to me.

Original post 6/5/06
The Principles for Responsible Investment launched by the UN S-G in late April at the NYSE are intended to extend corporate social responsibility concerns into the mainstream of corporate financing -- not just the marginalized social responsibility funds that so many institutional investors and investment managers have created.  The Principles have been adopted by investors controlling US$4 trillion in assets.  For those of you who have not reviewed them, here they are.  I have a question for anyone who is in the know -- why isn't TIAA-CREF on the list?

The Principles for Responsible Investment

As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following:        

1     We will incorporate ESG issues into investment analysis and decision-making processes.     

Possible actions:       

  • Address ESG issues in investment policy statements
  • Support development of ESG-related tools, metrics, and analyses
  • Assess the capabilities of internal investment managers to incorporate ESG issues
  • Assess the capabilities of external investment managers to incorporate ESG issues
  • Ask investment service providers (such as financial analysts, consultants, brokers, research firms, or rating companies) to integrate ESG factors into evolving research and analysis
  • Encourage academic and other research on this theme
  • Advocate ESG training for investment professionals
2     We will be active owners and incorporate ESG issues into our ownership policies and practices.     

Possible actions:        
  • Develop and disclose an active ownership policy consistent with             the Principles
  • Exercise voting rights or monitor compliance with voting policy             (if outsourced)
  • Develop an engagement capability (either directly or through outsourcing)
  • Participate in the development of policy, regulation, and standard             setting (such as promoting and protecting shareholder rights)
  • File shareholder resolutions consistent with long-term ESG considerations          
  • Engage with companies on ESG issues
  • Participate in collaborative engagement initiatives
  • Ask investment managers to undertake and report on ESG-related engagement

3     We will seek appropriate disclosure on ESG issues by the entities in which we invest.       

Possible actions:        
  • Ask for standardised reporting on ESG issues (using tools such as             the Global Reporting Initiative)
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    Ask for ESG issues to be integrated within annual financial reports    

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    Ask for information from companies regarding adoption of/adherence to relevant norms, standards, codes of conduct or international initiatives (such as the UN Global Compact)

  • Support shareholder initiatives and resolutions promoting ESG disclosure               

4     We will promote acceptance and implementation of  the Principles within the investment industry.

  Possible actions:        
  • Include Principles-related requirements in requests for proposals             (RFPs)
  • Align investment mandates, monitoring procedures, performance indicators and incentive structures accordingly (for example, ensure investment management processes reflect long-term time horizons when appropriate)
  • Communicate ESG expectations to investment service providers
  • Revisit relationships with service providers that fail to meet ESG             expectations
  • Support the development of tools for benchmarking ESG integration

  • Support regulatory or policy developments that enable implementation of the Principles


5    We will work together to enhance our effectiveness in implementing the Principles.

        Possible actions:        
  • Support/participate in networks and information platforms to share    tools, pool resources, and make use of investor reporting as a source  of learning
  • Collectively address relevant emerging issues
  • Develop or support appropriate collaborative initiatives               

6     We will each report on our activities and progress towards implementing the Principles.

       Possible actions:        
  • Disclose how ESG issues are integrated within investment practices

  • Disclose active ownership activities (voting, engagement, and/or        policy dialogue)

  • Disclose what is required from service providers in relation to             the Principles
  • Communicate with beneficiaries about ESG issues and the Principles
  • Report on progress and/or achievements relating to the Principles using a 'Comply or Explain'1 approach
  • Seek to determine the impact of the Principles
  • Make use of reporting to raise awareness among a broader group of     stakeholders

1The Comply or Explain approach requires signatories to report on how       they implement the Principles, or provide an explanation where they         do not comply with them.       

The Principles for Responsible Investment were developed by an international group of institutional investors reflecting the increasing relevance of environmental, social and corporate governance issues to investment practices. The process was convened by the United Nations Secretary-General.        

In signing the Principles, we as investors publicly commit to adopt           and implement them, where consistent with our fiduciary responsibilities.  We also commit to evaluate the effectiveness and improve the content      of the Principles over time. We believe this will improve our ability           to meet commitments to beneficiaries as well as better align our investment activities with the broader interests of society.

We encourage other investors to adopt the Principles.    

Economics, Governance/Management, International, Sustainability | Permalink

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