ESG Investing Confirms Its Rapid Advance In Paris

Corporates are taking environmental considerations into account when making investment decisions.

A sense of urgency has entered the realm of environmental, social and governance (ESG) considerations, which was unequivocally spelled out recently in Paris at the annual conference of the UN-supported Principles for Responsible Investment (PRI).

The conference was the largest ESG gathering yet convened, with 1,700 attendees from all corners of the globe, underlining the rampant charge of ESG on the global agenda.

The PRI was established in 2006 as part of an initiative by former UN Secretary-General Kofi Annan and aims to foster an ESG-compliant culture among investors globally. There was a surge in PRI membership during the 2007–2008 global financial crisis, amid calls for the development of a sustainable financial system.

The PRI’s more than 2,500 signatories collectively represent more than $86.3 trillion in assets that are invested in line with ESG factors.

Companies run in accordance with ESG factors often produce higher returns on equity and their stocks outperform indices.

Growth in the PRI’s number of signatories has been exponential over the past decade as the investment community adopts ESG as a formal decision-making discipline, and PRI members are directly impacting government policy.

“Our rapidly expanding network of signatories is becoming more involved in the policymaking process in order to encourage and shape sustainable finance policy around the world,” said Fiona Reynolds, CEO of PRI at the Paris conference. “Now we’re seeing a move from sporadic adoption to comprehensive sustainable finance policies.”

To that end, the recent announcement from America’s influential Business Roundtable that its large corporate members must prioritize stakeholders over shareholders, and emphasize ESG concerns in their mission statements, might well represent a watershed moment in Western capitalism in the move toward a new systemic reality.