Companies and investors are increasingly working together to address major global challenges. The adoption of environmental, social and governance (ESG) considerations in private investments is evolving from a risk management practice to a driver of innovation and new opportunities that create long-term value for business and society. Promoting ESG adoption throughout the investment value chain can encourage greater private investment in sustainable development, resulting in greater impact.
The various actors in the investment value chain, including investors, banks and companies, have been increasingly including ESG and sustainability information in their reporting processes. It will be important to create an enabling environment for sustainability and integrated reporting to flourish.
Principle-based voluntary initiatives are critical to further mainstream corporate sustainability and responsible investment. The ESG efforts by the various private actors are consistent with the Sustainable Development Goals (SDGs), but need to be leveraged further to achieve stronger outcomes. The elements for an ESG coalition are in place. In addition to the UN Global Compact, a number of principle-based, voluntary ESG initiatives are starting to gain traction throughout the private investment chain, including:
- Principles for Responsible Investment: representing asset managers and asset owners with well over US $45 trillion in capital
- UNEP Finance Initiative: with over 200 institutions, including banks, insurers and fund managers
- Equator Principles: a coalition of banking and similar financial institutions incorporating environmental and social risk into project finance transactions, covering over 70 per cent of all international project finance debt in emerging markets
- Principles for Sustainable Insurance: a sustainability framework for the development of innovative risk management and insurance solutions
- Sustainable Stock Exchanges Initiative: a peer-to-peer learning platform for exploring how exchanges can work together with investors, regulators, and companies to enhance corporate transparency and ESG performance and encourage responsible long-term approaches to investment