Trusts and foundations should think again on financial risks
Sunday, May 17th, 2009
Trusts
and foundations should consider environmental, social and governance
(ESG) risks and opportunities in their investments to safeguard value
and protect the interests of future beneficiaries -according to new
research released today by the EIRIS Foundation.
Sustainable returns: The value of environmental, social and governance factors for Foundation investments
examines why issues such as climate change and corporate governance
pose financial risks and opportunities for trusts and foundations.
Despite
their role in supporting pioneering social and environmental projects
through grants, many trusts and foundations are still lagging behind
other asset owners when it comes to responsible investment. This can
lead to significant conflicts between mission and investments.
The
financial crisis has highlighted the risks that all investors,
including trusts and foundations, are exposed to. It has underlined the
importance of responsible ownership and long-term investing which
require accountability, transparency, and the consideration of
‘extra-financial’ research in the investment process.
The
EIRIS Foundation’s new report sets out why these principles make sound
financial sense for trusts and foundations. It explores the growing
body of evidence to show how the integration of ESG risks and
opportunities into investment can safeguard and enhance value for
shareowners.
The paper also highlights the following steps
that trusts and foundations should take to ensure they are managing
investments in a responsible and sustainable way:
1) Agree a position on responsible investment
2) Research investment manager’s expertise and practice in ESG integration
3) Include ESG integration in the investment mandate
4) Join collaborative initiatives, such as the Carbon Disclosure Project
5) Vote shares on ESG related issues
6) Engage with companies directly or via investment managers
7) Invest in sustainability-themed funds such as greentech, microfinance or timber
Invest in responsible investment funds that use ESG integration
Report
author Sam Collin, Charity Adviser at the EIRIS Foundation, said
‘Responsible investment is nothing new – some charities have been doing
this for decades. There is compelling evidence that ESG issues have a
financial impact and this shouldn’t be ignored by trusts and
foundations. This fits clearly with the fiduciary duties of trustees
and with Charity Commission guidance. Trusts and foundations that fail
to take ESG issues into account could be seen as acting imprudently
and failing to secure their long term financial sustainability.’
Alastair
Hanton, Chair of the EIRIS Foundation, added ‘The integration of ESG
factors into investment processes is now recognised by the mainstream
as a way to enhance value – as demonstrated by the $18 trillion worth
of signatories to the United Nations Principles for Responsible
Investment. It’s not enough to just assume that ESG issues are being
integrated into the investment process. Acting as responsible owners,
trusts and foundations should question and encourage their asset
managers to adopt and implement best practice in responsible
investment.’
London. 31 May 2009. Ryan Frank’s ‘Isabella’ stool will be exhibiting at Pulse 2009 Earls Court.
Brighton
Habitat Aid
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