What makes a responsible investor?
We believe that “Responsible investment is a transparent approach, embedded throughout the investment process, that takes the negative and positive impacts on people and planet as seriously as financial risk and return.”
We know investors need detailed guidance to make responsible investment a reality. Below we explain four linked principles that underpin our definition.
1. Greater transparency
To increase accountability to clients and pension savers about the impact of investments made on their behalf. This should cover the actual and expected material impacts of their portfolio companies, how those impacts are factored into investment decisions, and how they shape stewardship with investee companies including escalation and approach to public policy advocacy.
2. Embedded throughout the organisation and process
A cultural shift to ensure that long-term impacts are considered across all investment decision-making. An approach that balances risk, return and long-term impacts is consistently applied across the organisation, covering all asset classes, investment strategies and offered funds.
3. Takes responsibility for positive and negative impacts of all investments on people and planet
As well as avoiding exposure to serious harm, this also means mobilising capital to drive positive impacts that mitigate harm, for example investing in low-carbon activities to mitigate carbon emissions.
4. Takes real-world impacts as seriously as financial risk and return
Creates objective, coherent mechanisms to ensure social and environmental impacts are considered against financial risk and return criteria, informed by credible global frameworks such as the Sustainable Development Goals, and shows how the trade-off of return against impact is calibrated.
For investment professionals
Read our comprehensive overview of how we define responsible investment, and how these principles can be applied in practice.