2 Nov 09 - Ban and Supachai address financial institutions on need for responsible investment
United Nations Secretary-General Ban Ki-moon and UNCTAD Secretary-General Supachai Panitchpakdi urged leaders of stock exchanges and financial institutions to better manage and integrate environmental, social and governance issues into their business practices.
UNCTAD co-hosted a meeting of institutional investors and CEOs from stock exchanges at United Nations Headquarters in New York on 2 November. More than 100 top executives from around the world met to explore how the world's exchanges could work together with investors, regulators, and business to encourage responsible long-term approaches to investment.
In a video message to open the meeting, Mr. Ban said that environmental, social and governance, so-called "ESG" issues, were critical in creating a world economy that was more stable, inclusive and sustainable. "Stock exchanges and other financial bodies and institutions have a key role to play," he told the group, which met to explore ways in which stock exchanges could promote sustainable business practices and long-term approaches to investment.
Dr. Supachai spoke to investment leaders about the urgent need to align investment with the sustainable development goals of countries around the world. "We welcome the work already done by many exchanges on this issue and this collaborative dialogue sends an important signal to listing authorities around the world that they play an important role in promoting the ESG agenda. UNCTAD research shows clearly that disclosure requirements can have a significant impact on the transparency and long-term sustainability of companies around the world".
The event - co-hosted by UNCTAD, United Nations Global Compact and the Principles for Responsible Investment (PRI) - examined the various ways in which stock exchanges could promote sustainable business practices. Those included existing best practices such as enhanced sustainability reporting requirements for listed companies and the establishment of ESG indices.
Stock exchanges around the world are becoming increasingly active in raising awareness of ESG issues and standards among listed companies, driven by calls from institutional investors and other key stakeholders. The calls of investors for greater ESG disclosure are echoed by many of the regulators, standard setters and professional accountants participating in UNCTAD's Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR). For many years, ISAR has called for improvements in corporate disclosure on ESG issues, and has worked with stock exchanges and regulators in emerging markets to help build their capacity in this area.
Investor pressure has been building on this issue through United Nations initiatives such as the United Nations Environment Programme Finance Initiative and PRI. One of the latter's six principles calls on investors to "seek appropriate disclosure on ESG issues by the entities in which they invest".
James Gifford, Executive Director of PRI, explained, "The global financial crisis convinced many investors and policymakers of the urgent need to promote better risk management, good governance and enhanced transparency to protect long-term returns. Any moves to improve corporate disclosure on ESG issues are likely to benefit exchanges through enhancing both the reputation of markets and the investability of the companies traded on them".
One of the many high-profile investors speaking at the conference was Paul Abberley, Chief Executive of Aviva Investors in London. In November 2008, Aviva Investors called for a debate on how stock market listing authorities could help promote increased corporate transparency. Mr. Abberley said, "We are extremely pleased with our collaboration with the United Nations and have high hopes that today's conference will play a catalytic role in promoting more sustainable business behaviour. Our main focus is on promoting a global listing environment that requires companies to consider how responsible and sustainable their business model is, and also encourages them to put a forward-looking sustainability strategy to the vote at their AGM".
Georg Kell, Executive Director of the United Nations Global Compact, said, "We are delighted to co-host this unique platform to explore how these market players can enhance corporate transparency, and ultimately performance, on ESG issues, and so encourage responsible, long-term approaches to investment. This is the right discussion at the right time, and I hope a forward-looking agenda on corporate sustainability reporting that matches investor demand will emerge as an output of this event".
In his closing comments, James Zhan, Director of UNCTAD's Division on Investment and Enterprise, told the participants that it was the intention of the organizers to continue this dialogue, possibly on an annual basis. The second dialogue is currently planned to be held in 2010 in China, in parallel with UNCTAD's World Investment Forum.