Davos, Switzerland, January 29, 2009
—A new report by IFC, the United Nations Global Compact, and the Swiss government finds that although the financial industry understands the necessity of developing methodologies and tools that examine environmental issues in the investment process, it is still not standard practice.
The 2008
Who Cares Wins
report urges the financial industry to advance efforts to integrate environmental, social, and governance (ESG) issues into mainstream investment decision-making and ownership practices. If they do not, consequences of climate change could fuel another financial crisis.
“Though current turbulence in financial markets may tempt investors and companies to think of environmental and social issues as tomorrow’s problem, we believe that urgent and wholehearted action is warranted not in spite of, but precisely because of the market dynamics observed in the past months,” said Rachel Kyte, IFC Vice President for Business Advisory Services. “The consequences of climate change on the financial markets, for example, could be far more serious than what we’ve experienced so far and could be substantially countered through immediate action.”
Scaling up ESG integration will require the investment industry to change the incentives and products they offer. The report recommends to:
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Accelerate engagement of asset owners and regulators to create enabling frameworks and increase market demand for ESG-inclusive investments
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Increase involvement of top-level leadership to unblock stalled situations and help them agree on how to share the costs and benefits of further market-building efforts
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Strengthen public-private partnerships, voluntary initiatives and principles-based approaches like the Principles for Responsible Investment and the Equator Principles
Georg Kell, Executive Director for the UN Global Compact, said, “ESG integration is about investors and companies taking a longer-term view, acknowledging the full spectrum of future risks and opportunities, and allocating capital as if they themselves were the beneficial owner. There can be no better way to restore public confidence in the markets and build a prosperous economic future.”
Ambassador Thomas Greminger, Head of the Political Affairs Division IV, Federal Department of Foreign Affairs (Switzerland), said, “Better ESG performance and integration into the management practices requires not only market incentives but standards set by regulation. Governmental responsibilities in this regard call for regulation on environmental and social risk assessments and reporting as well as transparency. Similarly governments should encourage dialogue among different stakeholders about international standards such as human rights and labor standards that play unfortunately a still minor role for investment decisions.”
About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in 2008, a 34 percent increase over the previous year. For more information, visit
www.ifc.org
.
For more information about IFC’s partners, please visit:
In Washington, D.C.
Katia Theriault, IFC
Phone: +1 202 458 9704
In New York
Gavin Power, United Nations Global Compact
Phone: +1 212 963 4681
Mobile: +1 917 679 8144
In Switzerland
Nils Rosemann
Federal Department of Foreign Affairs
Desk Human Security and Business
Phone: +41 31 325 87 73
Mobile: +41 79 779 53 64
Fax: +41 31 324 90 69
