ABSTRACT
The conventional definition of responsible investment (RI) proposed by the UN-backed Principles for Responsible Investment (PRI) is the integration of environmental, social, and governance (ESG) information into investment decision-making. The motives for integrating ESG are typically presented by practitioners as an effort to improve long-term investment performance by better assessing the investment risks and opportunities posed by long-term environmental and social trends or highlighting indicators that better identify quality of management in corporations or investment intermediaries. Summed up in the words of one practitioner:
Today’s institutional approach to responsible investment starts from the observation that a range of environmental and social issues are increasingly significant in business and investment terms. Issues such as climate change, water stress, resource scarcity, ageing populations, and human rights in supply chains are shaping markets, consumer preferences and government regulation. Companies need the right governance to align their strategy with these trends and protect their investors’ interests.
