The United Nations Conference on Trade and Development (UNCTAD) has called on all institutional investors to formally articulate their stance on responsible investment.
UNCTAD noted how there are now two “different and distinct” groups of pension funds worldwide – the half that report no RI activity and the half that reports at least some activity.
The comments follow its analysis of how responsible investment is implemented at the world’s 100 largest pension funds, with combined assets under management of $8.6trn (€6.5trn).
UNCTAD found almost half the world’s largest funds disclose at least one or more indicators based on the United Nations Principles for Responsible Investment. But no evidence could be found of RI practices at 51 of the top 100 funds, representing $3.4trn assets (or 39%) of the 100 funds’ total AUM.
Only 27 funds disclosed four or more indicators, but they accounted for $3.7trn (42%) of the total assets.
“One policy recommendation, therefore, given the emergence of these two groups, is that all institutional investors be encouraged to formally articulate their stance on RI to all stakeholders,” the Geneva-based institution states in a recently released 95-page report, the Investment and Enterprise Responsibility Review has published a “gap analysis”, which allows an easy comparison of how the world’s biggest funds measure up on RI.
It also notes the fact that the largest funds tend to be early adopters of RI, which “may indicate a trend toward much wider adoption of RI practices in the future”.
UNCTAD observes that as well as improving the accountability of companies to shareholders, policy makers should consider “improving the accountability of institutional investors to their beneficiaries”.
And there could be rules to require funds to disclose their approach to environmental, social and governance (ESG) issues within their portfolio companies, UNCTAD suggests. “Beneficiaries should be informed of these policies, and be provided with appropriate feedback mechanisms on such policies.”
“This report makes clear that both CSR communications and ESG analyses must now improve, to better indicate the contributions and impacts of business, rather than simply offer an engagement with the issues,” said UNCTAD Secretary General Supachai Panitchpakdi in the introduction to the report.