The 2015 Winter Roundtable, held in Rancho Palos Verdes outside of Los Angeles, revolved around the topic of “responsible investing” (RI). The topic generated lively discussions throughout the course of the event over two days and evenings. Beyond a general acknowledgement of the importance of environmental, social and governance (ESG) issues for long-term institutional investors, a wide array of perspectives were expressed, highlighting a lack of consensus among participants on how to address these issues in their investment programs, if at all.
Early on and throughout the discussions, an issue emerged around semantics, namely, that “responsible” investing is the terminology adopted by the United Nations-supported Principles for Responsible Investing (PRI). The PRI framework generated debate throughout the roundtable, as fewer than half of PPI’s members are signatories to the PRI. Numerous roundtable participants felt that ESG factors are increasingly considered in the normal course of evaluating investment opportunities, regardless of whether an explicit “ESG” label is in place or which terminology is used. One fund manager simply called it “common sense or good business practice.” These participants challenged the implied notion that if an investor is not a signatory to the PRI or does not explicitly boast an ESG framework, are they not “responsible” investors? Where is the irresponsibility if asset owners believe that their fiduciary duty to the beneficiaries is being fulfilled? What is really being achieved through PRI- like initiatives and obtaining those industry statuses? More importantly, what is the value to PPI members? How can long-term value and success be assessed? It was within this context that the roundtable began.
Representation was truly global, with members from North America, Europe, Asia, and Australasia approaching the topic from a diverse range of viewpoints. This diversity of perspective is partially reflective of the various sociocultural norms that permeate legal interpretations and precedents established across different regions. On one hand, Europeans in general view institutional asset owners as “stewards” of the people, which validates the endorsement of an ethics-based investment framework that aligns with government policies. On the other hand, pension funds and other asset owners in the United States, with notable exceptions, generally adhere to a more traditional fiduciary role that arguably narrows the focus down to financial returns alone. Between these two lies a spectrum of views that affect the ESG action or inaction of different institutional investors. Not surprisingly, less than one out of four institutional investors in the U.S. have what they would consider an “ethical” or “responsible” investing strategy in place at this time. The differences in views were clearly vocalized over the course of the roundtable on a number of issues, such as whether the global financial crisis of 2007-2008 was a catalyst for increased interest and mainstreaming of ESG issues.
Read the full Insights report
Review the agenda