Beedie School of Business and SHARE welcome UN PRI meeting

The CIBC Centre for Corporate Governance and Risk Management at Simon Fraser University’s Beedie School of Business in partnership with the Shareholder Association for Research and Education (SHARE) hosted a meeting on February 28 welcoming delegates from the United Nation’s Principles for Responsible Investing (PRI) committee. On the agenda was the role of responsible investing in ensuring risk management and building healthy, sustainable capital markets.

Daniel Shapiro, Dean of the Beedie School of Business, introduced keynote speaker Dr. Wolfgang Engshuber, chair of the UN’s PRI committee. In his opening remarks, Shapiro said that the Beedie School of Business was proud to have committed itself to upholding many of the same values that define the PRI as a signatory to the Principles of Management Education (PRME). Both initiatives adhere closely to the UN Global Compact on long-term ethical sustainability.

Founded in April 2006, as a vision of former UN secretary Kofi Annan, the number of signatories to the PRI has grown from less than 200 to over 1500, managing combined global assets of 35 trillion US dollars. Annan’s goal was to minimise global instability by encouraging financial organizations into thinking long term about their risk management strategies in addition to addressing environmental, social and governance (ESG) issues.

Reflecting on the time elapsed since the creation of PRI, Engshuber remarked that while preparing for this auspicious meeting he had read a paper on fiduciary responsibility from the SHARE website. Though well written, he was puzzled; why had certain key sources not been referenced? His question was answered on the front page – “The document had been written in 2005 and the problems are already addressed. Now there isn’t a conflict; fiduciary responsibility is an actual responsibility,” said Engshuber.

Until now all the PRI’s objectives have been aspirational but, as Engshuber noted, there is mounting evidence and a certain amount of regulatory pressure encouraging organizations to comply.

“Responsible investing and the PRI are growing strongly globally,” he said. “Investors recognize the need to respond to significant trends. And the evidence is that [addressing] ESG [issues] and responsible investing enhance returns and reduce risk is becoming stronger.”

Engshuber highlighted the positive correlation between ESG-awareness embedded in corporate culture and performance by referencing research that companies with high ESG scores are the ones with the best stock performance. Those which focus on ESG issues, especially their environmental responsibilities, have better credit ratings.

Factors such as ESG and PRI compliance are also taken into consideration by investment industry regulators and may be considered before stock exchange listing. Furthermore, under pressure from consumers and government, pension funds, for example, may look for ESG compliance as evidence of socially responsible investing.

Many of these points were further elaborated in a panel discussion following the keynote, moderated by Michael Parent, Director, CIBC Centre for Corporate Governance and Risk Management. The panel of experts comprised Robert Adamson, executive director of CIBC Centre for Corporate Governance and Risk Management; Bob Walker, Vice President, ESG Services and Ethical Funds at NEI Investments; Dermot Foley, Manager ESG Analysis at Vancity; Bryan Thomson, Vice President, Equity Investment at BcIMC; and Laura O’Neill, Director of Law and Policy for SHARE.

Panelists spoke on issues of stewardship codes, and educating investors on non-financial externalities that should be considered when making investment decisions. They also covered topics such as the impact of executive compensation and emerging markets on ESG issues within an organization. These points were echoed further in questions from an extremely engaged and knowledgeable audience.

With this growing emphasis on embedding ESG issues within organizational governance, Engshuber was pleased to announce the launch of a robust recording framework for the PRI this October. “Reporting is a very important part of the principles and signatories must publish their progress,” explained Engshuber.

“If they don’t, then they are excluded from the initiative,” he added.

Although recording initially seems like a threat, it is also a good tool to manage strategy, giving feedback to an organization and information on how its peers are progressing. This transparency also avoids green washing, upholding many of the principles inherent to responsible investing and enhancing engagement with consumers.

Dr. Engshuber closed his address reiterating the need to develop long-term strategies, rather than just focusing on profits.

“Imagine going home tonight, and your spouse or your child asks,’ So what did you do today?’” he speculated, “and you could answer them, ‘Well today I created something of real value’ – wouldn’t that be great?”