July 16, 2007
Sustainability Picks Up Where Supply and Demand Meet
by Anne Moore Odell
Both investors and companies are working on sustainability issues as new reports by UN PRI and
Goldman Sachs show ESG issues are gaining momentum.
Sustainability is gaining momentum as more shareholders, stakeholders, and businesses are creating
policies to protect the environment, empower people, and create transparent business practices. If
the current drive toward sustainability is enough or too little too late is for future generations
to debate, but it is for the future generations that many are working. New studies from the
Principles for Responsible Investment (PRI)
and Goldman Sachs point to both sides
of the supply and demand chain asking for more corporate responsibility, and in many cases, getting
More than 200 institutional investors from around the world have signed onto
the PRI, an initiative of UNEP Finance
Initiative and the UN Global
Compact. These large investors, which represent more than $9 trillion in assets, have agreed
to incorporate environmental, social, and governance (ESG) issues into their investment policies.
The first survey of these investors was recently released in Geneva, Switzerland, at the GIobal
Compact's Leadership Summit, held
on July 5th and 6th.
The "PRI Report on Progress 2007" notes that 88% of investment
manager signatories and 82% of asset managers are involved with shareholder engagement on ESG
issues. More than four-fifths of investment manager signatories have staff dedicated to ESG
The survey found that the Carbon Disclosure Project, a non-profit for
institutional investors and businesses to dialogue about climate change, has drawn a lot of
interest from investors with over half of surveyed investors asking companies for standardized ESG
"While signatories are making significant progress in implementing the
Principles, we recognize that there is still a lot to be done," said Donald MacDonald, PRI
Chairperson. "What is especially pleasing is that signatories are committed to increasing their
responsible investment activities considerably during 2007. This year's assessment is the beginning
of an ongoing annual process that will be improved over time."
Another finding reported by
PRI is that 80% of asset owners have communicated their ESG issues and strategies with their
beneficiaries. Sixty-three percent of respondents said that they signed the PRI to increase trust
in their company.
The act of creating the PRI survey itself helped signatories reflect on
progress made and helped create best practice guidelines for investors.
"The PRI has made
the integration of ESG issues easier for many investors," said Jane Ambachtsheer, Head of
Responsible Investment, Mercer Investment
Consulting. "The PRI Report on Progress further supplements the Principles and associated
possible actions with real-life examples of how signatories are implementing the Principles. While
helping to develop the report we identified many interesting examples of responsible investment,
many of which are possible first steps for investors new to responsible investment," Ambachtsheer
A new report from Goldman Sachs, an international investment bank with offices in
more than 20 countries, finds that companies that have ESG policies in place have outperformed the
general stock market by 25% since August 2005. Goldman Sachs further reported that 72% of the
companies with ESG policies outperformed competitors.
Goldman Sachs studied companies
across six sectors (beverages, food, energy, media mining, and steel) and analyzed their ESG
performance, their positions in long-term industry trends, and their financial returns.
However, a third survey of chief executives that have signed onto Global Compact shows that the
implementation of ESG principles into practice at companies still needs work. The survey, conducted
by McKinsey & Company, was conceived of to
complement the PRI survey of investment and asset managers.
The executive survey reports
on a positive note that more than 90% of CEOs are doing more than they did five years ago to
include ESG issues into companies' operations. Yet although 72% of CEOs said corporate
responsibility should be part of daily operations, only 50% think that their companies are actually
practicing it. Twenty-seven percent of CEOs think that the corporate responsibility is embedded
into the global supply chain.
"Taken together, these three reports show that for an
increasing number of business leaders, corporate responsibility is no longer an option, it is a
necessity in order to compete successfully," said Georg Kell, Executive Director of the UN Global
Compact. "At the same time, in order to fully maximize these benefits and increase their
competitive advantage in the global marketplace, companies must adopt a broader and deeper approach
with respect to implementation of corporate responsibility principles."
"The PRI is not
just an initiative for socially responsible investors, but was designed for mainstream investors
working to act in the best long-term interests of their beneficiaries," said Ambachtsheer.