Eurosif believes that EU policy-makers should foster the development of SRI among institutional investors, in particular in mandating disclosure with regards to what extent (if at all) extra-financial (“ESG”) considerations are taken into account in the selection, retention and realisation of their investments; and disclose their policy in relation to the exercise of the voting rights attached to their investments.
Institutional investors, such as pension funds and insurers, represent long-term beneficiaries who have a natural interest in preserving wealth in their investment portfolios. They are also holders of some of the largest pools of investment capital with the greatest potential impact on industry practices. Within the financial arena, institutional investors determine capital allocation and are therefore crucial to encouraging both corporations and financial institutions to move towards more sustainable behavior by incorporating forward-looking, long-term perspectives into their investment decisions.
In this agenda, extra-financial factors (“ESG”) have a key role to play. There is a growing consensus in the financial community that taking ESG issues into consideration is consistent with the fiduciary duty of investors when it impacts financial returns. ESG issues such as climate change, resource scarcity, misaligned executive compensation or corruption for instance, can have material impacts on long-term investment portfolio performance.