A legal framework for the consideration of sustainability impact in investor decision-making

Within the next decade, assessing and accounting for the sustainability impact of investment decision-making needs to be a core part of investment activity. In other words, consideration of how the investment decision affects sustainability issues, not just how sustainability issues affect the investment decision.

Launched in January 2019, the new project, A Legal Framework for Impact, will support this transition. This is a joint project led by UNEP Finance Initiative, the Principles for Responsible Investment (PRI), and The Generation Foundation.

Investors have a fiduciary duty to integrate financially material factors, including environmental, social and governance (ESG) factors. In addition, investors are increasingly considering ‘impact duties’ – such as decarbonisation targets, commitments to quality of life, gender equality or integrating the impact of their investments on wider society.

While there are emerging ‘pockets of excellence’ in technical understanding, including methodologies and disclosure requirements on the integration of impact in investment decision-making, fundamental legal questions remain:

• Are there legal impediments to investors adopting ‘impact targets’—for example—that an investor’s investment activity is consistent with no more than 1.5 degrees of warming?
• Are investors legally required to integrate the sustainability impacts of their investment activity in their decision-making processes?
• On what positive legal grounds could or should investors integrate the realisation of the SDGs in their investment decision-making?

This project will collaborate with a major law firm to understand and analyse how investors can manage dual duties (their fiduciary duty and sustainability impact duties) and what happens if they are in conflict. To learn more, download the project document here.

Call to Contribute: Join the Reference Group

The project will form a Reference Group of experts from investment firms that have developed or are in the process of developing a strategy for the integration of sustainability impact considerations in their firm’s core strategy and investment decision-making.

The Reference Group has the opportunity to help support the research by sharing policy developments, questions, concerns and information on legal, regulatory and fiduciary implications of the management of sustainability impact in investment practice. The Reference Group will include international, senior policy, investment and/or legal professionals from a PRI and/or UNEP FI signatory organization who have the interest and ability to contribute and who are headquartered in the major jurisdictions (e.g. EU, US, UK, France) covered by the project.

If you are interested in becoming involved in the project and joining the reference group, please contact Elodie Feller (elodie.feller@un.org), Investment Programme Lead, UNEP FI.

Download the Legal Framework for Impact project document here.

UNEP FI’s work on A Legal Framework for Impact is undertaken collaboratively with the Principles for Responsible Investment (PRI), and The Generation Foundation.