Discretionary Investment Management | Ravenscroft Group | Shannon Lancaster
16 Oct 21

Countdown to COP26 - United Nations Principles for Responsible Investment

Later this month, the UN Climate Change Conference UK 2021 starts in Glasgow – the first time it has been held in the United Kingdom. Known as COP26, it will bring together 197 nations and territories to accelerate action in tackling climate change. In the second of a series of four articles, Ravenscroft’s fund research team looks at UNPRI.

United Nations Principles for Responsible Investment

Growing awareness of how environmental, social and governance (‘ESG’) issues factors can influence the value of a company has driven more investors to seek greater transparency about how and where their money is invested. As stewards of clients' capital, we are committed to being a responsible investor. We recognise that relevant and material ESG issues can meaningfully impact investment performance. As a result, these factors are critical components of our integrated research analysis, decision-making, and ongoing monitoring. While we have always considered ESG matters in this way, we have spent the past few years refining and formalising our responsible investment approach across the business.

What is responsible investment?

Responsible investment quite broadly means incorporating environmental, social and governance (ESG) factors in investment decisions. Investors are increasingly interested in how ESG factors are incorporated into investment process and how they will affect the long term performance of their holdings. This can be an overwhelming task without any standardised and consistent terminology associated with ESG investing. The investment approaches available in this space are given a plethora of labels such as sustainable, green, ethical or impact investments. Picking apart the differences between each of them can be tricky.

Since the mid-1990s, responsible investment regulation has increased significantly, with a particular surge since the financial crisis in 2008. The regulatory push has also been driven by a global recognition of the important role the finance industry can play in combatting issues such as climate change and resource scarcity. Several regulations and initiatives have been introduced to simplify ESG investment and to combat ‘greenwashing’. Greenwashing involves intentionally providing misleading information about the sustainability characteristics of an investment product. One of these initiatives aimed at encouraging the financial industry to understand and improve their responsible investment practices is the United Nation’s Principles for Responsible Investment.

What is the UNPRI?

In 2020, Ravenscroft became signatories to the United Nation’s Principles for Responsible Investment. The UNPRI is a United Nations-supported global network of investors working together to implement its six voluntary and aspirational principles. Its goal is to understand the implications of sustainability for investors and support signatories to facilitate incorporating these issues into their investment decision-making and ownership practices. In implementing these principles, signatories contribute to the development of a more sustainable global financial system.

What are the Principles for Responsible Investment?

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

Signing the internationally recognised Principles enables organisations, whether a huge institutional business or a small boutique investment manager, to publicly demonstrate their commitment to responsible investment and be part of a growing global community that is driving real change.

The UNPRI has developed a 10-year blueprint for responsible investment which it uses to guide signatories on how to contribute to a sustainable financial industry. This blueprint is based on conversations with signatories, who are asset owners, investment managers and services providers from around the world and sets the direction of their work for the decade ahead.

ESG has risen to the top of both the regulatory agenda and investors’ minds. Integrating these sustainability factors in investment decision making and ownership will no longer viewed as an optional but essential over the coming years. Financial sector regulation and initiatives continue to evolve and will hopefully simplify this area for investors.

As a financial services business, we recognise that not only do we have a responsibility to invest in a sustainable way for our clients but that in reality, companies that commit to addressing these urgent issues stand to realise greater business opportunities in the future—and thus will achieve higher returns for their long-term shareholders.

To read the first article, please click here

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