Dr Heiner Hasford and Rolf Häßler explain the significance of the UN's Principles for Responsible Investment.
On 27 April, United Nations secretary-general Kofi Annan rang the opening bell at the New York Stock Exchange and presented the Principles for Responsible Investment (PRI) to the public. The six principles are a guideline for institutional investors to consider social and ecological criteria when making investments. Over 60 asset owners and investment managers have already recognised the PRI, with Munich Re being one of the first signatories. Together, they represent around E3bn of assets under management.
The widespread support for the PRI shows that an increasing number of companies recognise the benefits of integrating social and ecological criteria into the investment process. This approach helps to deal with risks in a professional manner – something our industry stands for in a way almost no other does. Numerous studies have shown that sustainability-related investment criteria reduces risk without impairing performance. There is thus a great argument for linking a fair return on investments to an active contribution to promoting sustainable development.
Something that has seldom been discussed is the benefits for the liabilities side of insurance accounts, where monetary claims burdens are reflected. If institutional investors integrate ecological criteria in their investment decisions, the pressure on companies to deal actively with environmental issues should increase. Functioning management systems and other elements of active environmental management reduce the risk of environmental catastrophes and related claims. The same applies to climate protection. If companies take a more active role here, due to pressure from the capital markets, it will ultimately help to reduce climate change.
The PRI can support this development in two ways: first, it will contribute to propagating and anchoring the sustainability-oriented investment approach on the capital market; second, it can help consolidate the numerous initiatives on this topic, making them more powerful. It helps that the PRI are described in general terms, leaving room for individual company solutions. The challenge now is for this to become more than a well-meant initiative but one that will benefit both investors and the environment.