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During the global financial crisis, an economic setback in one part of the world quickly spread elsewhere. To prevent this in the future, investors today expect businesses to be more transparent and accountable. They must communicate openly, and not just about their financial practices. Social and environmental challenges can also spread easily from one region to another.
That’s why more and more mainstream capital markets – including major institutional investors – now evaluate companies’ performance on environmental, social and corporate governance (ESG) issues. For instance, issues related to climate change, water, human rights or anti-corruption can affect companies’ ability to create value. Companies that proactively manage ESG risks and opportunities are more likely to have stronger long-term financial performance. This makes them better investments. Businesses that are transparent build trust and contribute to a strong and fair market. They also can enjoy strategic opportunities for growth.
Investing in sustainability can help create more stable and prosperous economic systems. The UN Global Compact is helping:
- Companies take a holistic approach to assessing and addressing potential ESG risks and opportunities. We’re encouraging companies to embed ESG issues into their operations and investments, including corporate pension schemes. We’re improving companies’ information-sharing with other capital market actors by developing a number of tools, such as the Value Driver Model, and collaboration platforms, such as Global Compact LEAD.
- Investors understand and incorporate ESG into their investment decision-making through our relationships with other international organizations. These include the UN-supported Principles for Responsible Investment (PRI), UNEP Finance Initiative (UNEP FI), Equator Principles, and Principles for Sustainable Insurance
- Stock Exchanges enhance corporate transparency and performance on ESG issues and encourage sustainable investment through our involvement with the Sustainable Stock Exchange Initiative (SSE). Investors can evaluate potential financial performance through an ESG lens with our Global Compact 100 index.
We invite you to join us as we help global markets deliver greater value to society.