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Business and Policy Areas
Business and Policy Areas

United Nations Launches Principles for Responsible Investment

June 1, 2006

In April, the United Nations launched a high-level framework intended to help institutional investors integrate the consideration of environmental, social, and governance (ESG) issues into investment decision-making and ownership practices. The Principles for Responsible Investment initiative was designed to improve long-term returns to beneficiaries.

Investment professionals are increasingly adopting the perspective that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios.  While investors need to consider these issues in order to fulfill their fiduciary responsibility, they previously lacked a framework for doing so.  The Principles for Responsible Investment now provides such a framework.

The Framework

The six overarching principles, which are voluntary, are undergirded by 35 voluntary actions that institutional investors and asset managers can take to integrate ESG considerations into their investment activities.  These actions relate to investment decision-making, active ownership, transparency, collaboration, and gaining wider support for these practices by the whole financial services industry.

Focusing on engagement rather than divestment, the principles forge a much-need link between corporate responsibility and decision-making in the financial markets.  They are designed to be compatible with the investment styles of large, diversified institutional investors that operate within a traditional fiduciary framework, often making divestment or avoidance impractical.   Thus, the principles do not call for exclusion or screening out of particular companies or sectors; rather, they suggest a policy of engagement with companies.

The principles apply across the entire investment business and are not designed to be relevant only to socially responsible investing (SRI) products, although they do point to a number of approaches (such as active ownership and the integration of ESG issues into investment analysis) practiced by SRI and many corporate governance fund managers.

Six Principles

Signatories commit to the following six principles:

1.       Incorporate ESG issues into investment analysis and decision-making processes.
2.       Be active owners and incorporate ESG issues into their ownership policies and practices.
3.       Seek appropriate disclosure on ESG issues by the entities in which they invest.
4.       Promote acceptance and implementation within the investment industry.
5.       Enhance their effectiveness by working together to implement the principles.
6.       Report on activities and progress toward implementing the principles.


Signatories are categorized in three ways:  asset owners, investment managers, and professional service partners.  Commitment by signatories is expected from the top level of organizational leadership.  Signatories currently include asset owners holding more than $4 trillion in assets and investment managers (totaling more than $3 trillion in assets). Current list of signatories.

Development of the Principles

Based on the premise that peace, security, and development dovetail with prosperity and growing markets, the United Nations Environment Programme Finance Initiative (UNEP FI) and the UN Global Compact coordinated a process to develop the principles, which are voluntary.  Rather than being prescriptive, the principles provide a range of possible actions for incorporating ESG issues into investment decision-making and ownership practices.

In early 2005, the UN Secretary-General invited a group of the world’s largest institutional investors to join a process to develop the Principles for Responsible Investment.  Individuals representing 20 institutional investors from 12 countries agreed to participate in the Investor Group. This group accepted ownership of the principles and had the freedom to develop them as they saw fit.

The group was supported by a 70-person multi-stakeholder group of experts from the investment industry, intergovernmental and governmental organizations, civil society, and academia.  The process, conducted between April 2005 and January 2006 involved a total of five days of in-person deliberations by the investors and four days by the experts, with hundreds of hours of follow-up activity.  

These meetings resulted in the Principles for Responsible Investment.  Open to all institutional investors, investment managers, and professional service partners to support, the PRI reflects the core values of the group of large investors whose investment horizon is generally long and whose portfolios are typically highly diversified.

Phase 2 and the Investment Supply Chain

Now that the principles have been launched, Phase 2 of the process will promote adoption of the principles by additional investors, provide comprehensive resources to assist investors in implementing the principles and actions, and facilitate collaboration among signatories.

Institutional investors will need to encourage a change in the way that their agents incorporate ESG issues into their processes.  Principles 1 and 4 offer suggestions on how this may be done.  It is also expected that the supply chain (fund managers, analysts, and consultants) will respond by offering products and services to help in implementation of the principles.

Project Governance

The principles will be governed by a board, a majority of whom will be asset owners, elected from within the asset owner category of signatories. The UN will be represented.  Space will be provided for additional members to be appointed by the board as required.

UNEP Finance Initiative

The United Nations Environment Programme Finance Initiative (UNEP FI) is a unique global partnership between UNEP and the financial services sector.  UNEP FI works with 160 financial institutions—banks, insurers, asset managers, and pension funds—to develop and promote linkages between sustainability and financial performance.  UNEP FI is the oldest and largest partnership between the UN and the global financial sector. UNEP FI promotes the adoption of best environmental and sustainability practice at all levels of financial institution operations.

UN Global Compact

Launched by United Nations Secretary-General Kofi Annan in 2000, the UN Global Compact brings business together with UN agencies, labor, civil society, and governments to advance 10 universal principles in the areas of human rights, labor, environment, and anti-corruption.  Through the power of collective action, the Global Compact seeks to mainstream these 10 principles in business activities around the world and to catalyze actions in support of broader UN goals.  With over 2,500 participating companies from more than 90 countries, it is the world’s largest voluntary corporate citizenship initiative. 

NACUBO Resource:  Anna Marie Cirino, associate director for financial management policy, 202.861.2570