The Value of Responsible Investment
Its calls for strong and collective leadership from the investment industry pointing to a 'moral, financial and economic case for action.'
The ILG's goal is 'to help shift the investment chain towards responsible, long-term value creation, such that economic, social and environmental sustainability are delivered as an outcome of the investment process alongside satisfactory, long-term investment returns.'
In outlining the case for action, the authors conclude that in controlling the public's savings flow, large asset owners and assets managers have a responsibility to avoid systemic risk through their investments.
The ILG believes that this responsibility is material for investors because not only are financial and non-financial value mutually dependent, but also ESG considerations can be necessary for good financial outcomes.
The report outlines actions investment institutions can take to maximise the opportunities of investment that seeks to create environmental, social and governance benefits, including:
Commission targeted research on the degree to which the risks generated by so called environmental 'megatrends' are placing a drag on economic performance, limiting future returns.
Pursue a range of tactical opportunities to support responsible investment, for example standardised reporting on evironmental and social impact, long-term investment mandates, and demonstration of alignment between fiduciary duty and ESG integration.
Scale up capital allocation into the technologies, infrastructure and business models of a future low carbon, green economy. This will depend upon solid investment principles and clear enabling actions from policy makers.
Dr Jake Reynolds, Director of Business Platforms at CISL, said: "In a world that neglects to account for social and environmental costs on corporate balance sheets, costs we know can ultimately impact value, responsible investment can be seen not only as a smart investment strategy but as an essential response to growing sources of systemic risk."
This publication is the ILG's first report. Future reports will be issued through the group's other work streams, which include reporting investment impact.
The Group is supported by financial economists at the Cambridge Judge Business School. It's secretariat is provided by the University of Cambridge Institute for Sustainability Leadership (CISL).
For both asset owners and asset managers this report and the future work of the ILG may be well worth following.