New Report Urges Financial Industry to Integrate Sustainable Investing Practices

(Davos, Switzerland, 28 January 2009) - A new report by the International Finance Corporation (IFC), the United Nations Global Compact, and the Swiss government finds that although the financial industry understands the necessity of developing methodologies and tools that examine environmental issues in the investment process, it is still not standard practice.

The 2008 Who Cares Wins report, titled Future Proof?, urges the financial industry to advance efforts to integrate environmental, social, and governance (ESG) issues into mainstream investment decision-making and ownership practices. If they do not, consequences of climate change could fuel another financial crisis.

 “Though current turbulence in financial markets may tempt investors and companies to think of environmental and social issues as tomorrow’s problem, we believe that urgent and wholehearted action is warranted not in spite of, but precisely because of the market dynamics observed in the past months”, said Rachel Kyte, IFC Vice President for Business Advisory Services. “ The consequences of climate change on the financial markets, for example, could be far more serious than what we’ve experienced so far and could be substantially countered through immediate action”.

Scaling up ESG integration will require the investment industry to change the incentives and products they offer. The report recommends to:

• accelerate engagement of asset owners and regulators to create enabling frameworks and increase market demand for ESG-inclusive investments;
• increase involvement of top-level leadership to unblock stalled situations and help them agree on how to share the costs and benefits of further market-building efforts; and  
• strengthen public-private partnerships, voluntary initiatives and principles-based approaches like the Principles for Responsible Investment and the Equator Principles.

“ESG integration is about investors and companies taking a longer-term view, acknowledging the full spectrum of future risks and opportunities, and allocating capital as if they themselves were the beneficial owner", said Georg Kell, Executive Director of the UN Global Compact. "There can be no better way to restore public confidence in the markets and build a prosperous economic future”.

“Better ESG performance and integration into the management practices requires not only market incentives but standards set by regulation", said Ambassador Thomas Greminger of the Swiss Federal Department of Foreign Affairs. "Governmental responsibilities in this regard call for regulation on environmental and social risk assessments and reporting as well as transparency. Similarly governments should encourage dialogue among different stakeholders about international standards such as human rights and labor standards that play unfortunately a still minor role for investment decisions”.

The 2008 Who Cares Wins report (pdf)

Contact

Gavin Power
Deputy Director
Head of Financial Markets
UN Global Compact
powerg@un.org
+1-917-679-8144 

About Who Cares Wins

Who Cares Wins was launched in early 2004 as a joint initiative of the financial industry and the UN Global Compact, the IFC, and the Swiss Government. The aim was to support the financial industry’s efforts to integrate environmental, social and governance (ESG) issues into mainstream investment decision-making and ownership practices through as series of high-level meetings with investment professionals. In 2004, 20 financial institutions from nine countries with total assets under management of USD 6 trillion endorsed the guidelines and the recommendations of the WCW Initiative on how to better integrate ESG issues into the investment industry.

About the International Finance Corporation

IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in 2008, a 34 percent increase over the previous year. More information is available from the International Finance Corporation .

About the UN Global Compact

Launched in 2000, the UN Global Compact brings business together with UN agencies, labour, civil society and governments to advance ten universal principles in the areas of human rights, labour, environment and anti-corruption. With over 5000 participating companies and hundreds of other stakeholders from more than 130 countries, it is the world's largest corporate sustainability initiative.        

About the Swiss Department of Foreign Affairs

The promotion of peace and human rights and the provision of a sustainable socio-economic order is the responsibility of the state. Switzerland therefore regards dialogue with non-state players with a specific impact on human rights, such as corporations in general and financial institutions in particular, and their integration into peace and human rights policies as an important form of co-operation. With a specific focus on conflicts the Political Affairs Division IV is therefore constantly working together with representatives of the private economy – mainly from the financial and trading sectors – to develop methods and instruments aimed at minimising the negative influences of business activities on the course of conflicts, and promoting ways in which they can have a positive impact. More information is available from the Swiss Department of Foreign Affairs .