Investors worth $3 trillion call out corporate sustainability failures

A group of global investors from 12 countries that manage over $3 trillion of assets called for improved corporate reporting on environmental, social and corporate governance (ESG) activities.

The investors, all signatories to the UN-backed Principles for Responsible Investment (UNPRI), also challenged companies that had failed to produce a mandatory annual report communicating their progress in corporate sustainability, according to a press release from UNPRI.

The 29 straggling companies have an estimated combined market cap of $136.9 billion, and their participation in Global Compact requires that they fill certain reporting criteria. The UN Global Compact is a strategic policy initiative for businesses who wish to  commit to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. The Global Compact recently announced that it has expelled 3,123 companies since 2005 for failure to communicate progress of their commitment.

Over the last five years, such investor action has resulted in around 40% of straggling firms consequently submitting sustainability reports, and has included Severn Trent, Merck Kga, The Gap and LVMH.

The investor coalition has also called for an increased level of reporting from 89 “leader” companies with a combined market cap of an estimated $2.45 trillion, including Novo Nordisk, Royal Dutch Shell, Daimler, Nestle, Toshiba Corporation and Siemens.

James Gifford, executive director of the PRI said, “After the global financial crisis many investors believe that improved corporate disclosure of ESG issues leads to better risk management, good governance and enhanced transparency, all of which are necessary to protect long-term returns. Companies that would attract investors need to recognise this if they want to attract capital.”

Gavin Power, deputy director of the UN Global Compact added, “At the upcoming Rio+20 Summit, there will be an opportunity for governments and public policy makers to fully take stock of the rapidly evolving trends in business sustainability and responsible investment – with an eye towards creating new incentives to drive higher levels of sustainability performance and disclosure.

“We encourage investors to actively participate in the Rio+20 process, and welcome their contributions.”

Allowing environmental, social and corporate governance issues to inform your investment choices is one way you can become part of the move towards sustainable corporate practice. Ask your IFA for more details or fill in our online form and we’ll connect you to a specialist sustainable investment adviser.

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