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The principles of responsible investment – a short series. Principle three – disclosure.



The third principle states that signatories will “seek appropriate disclosure on ESG issues by the entities in which we invest.”

“Sunlight (as well as being an exceptional source of limitless, clean energy and investment opportunity) is the best disinfectant”, to quote Associate Supreme Justice, Louis Brandeis. Our political and business leaders would clearly be far more honest if they knew their dealings were subject to greater scrutiny in a transparent environment. Companies would often behave more responsibly if they knew their recklessness towards the planet and its people was to be regularly disclosed and well-publicised.

Most commercial entities seek to safeguard their competitive advantage by putting into the public domain only what they need to by law or a highly polished image in the form of an annual report or marketing. Very few organisations are happy to disclose anything that might give a competitor some inside knowledge or tarnish that shiny image in any way. They will also often ruthlessly hunt down those who attempt to tarnish that reputation.

Nevertheless, the environmental and social footprint of business affects all of us, the commons. It is not a commercially sensitive issue, but a public interest one. Governance issues have a material effect on investors. Any prospectus would be false if it did not cover ESG issues that may have a huge impact on future performance. Clearly, they should be fully disclosed to a recognised standard.

In this area some of the greatest progress is being made through the Global Reporting Initiative and projects such as the Carbon Disclosure Project. By simply naming those who have disclosed their ESG activities, it shames those who do not.  It also leaves people with the impression that those who do not disclose have something to hide.

One of the challenges is how little the average person or investor knows about these reporting standards. Institutional investors and advisers therefore have a duty of care to be aware of these standards and ensure that the values and ethics of the investor are matched by the disclosure of the companies being invested in.

In addition, most investors invest in funds that contain holdings in multiple enterprises. It is difficult to identify funds that have a consistent disclosure performance across the holdings.  Again, the adviser or fund manager plays an essential role here ensuring that disclosure is reported on in a consistent and transparent way.

Many of these initiatives preach to the converted in that those who take an interest in ESG issues know the standards. As we have regularly discussed most people do not make the connection between their investment portfolio and real world environmental and social outcomes. When there is a disconnect between and investment and an individual company, governance issues often do not register. Even fewer people make the connection between their pension fund and the companies it invests in.

We would like to see far greater promotion of these principles, norms, standards, codes of conduct and international initiatives. This would include regularly listing those major companies who comply with them and, perhaps more controversially, those that do not.  It is only in an environment of complete knowledge that investors can make the informed choice they have a right to.

Tomorrow we explore the promotion of the principles within the industry.

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Simon Leadbetter is the founder and publisher of Blue & Green Tomorrow. He has held senior roles at Northcliffe, The Daily Telegraph, Santander, Barclaycard, AXA, Prudential and Fidelity. In 2004, he founded a marketing agency that worked amongst others with The Guardian, Vodafone, E.On and Liverpool Victoria. He sold this agency in 2006 and as Chief Marketing Officer for two VC-backed start-ups launched the online platform Cleantech Intelligence (which underpinned the The Guardian’s Cleantech 100) and StrategyEye Cleantech. Most recently, he was Marketing Director of Emap, the UK’s largest B2B publisher, and the founder of Blue & Green Communications Limited.


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