Principles for Responsible Investment, UNEP FI and The Generation Foundation publish guidance to support the growing number of asset owners and managers investing for sustainability impact (IFSI)
London, 21 November 2024 – Today, Principles for Responsible Investment, UNEP FI and The Generation Foundation published guidance to support the growing number of asset owners and managers investing for sustainability impact (IFSI). Informed by the joint project A Legal Framework for Impact, the guide introduces a four-part framework to invest for sustainability impact, and considers the degree of influence different actions can achieve.
The four steps outlined in the report ask investors to determine their intention, set real-world sustainability goals, take action through a combination of tools, and measure progress. This approach will help investors to practically implement the findings of the Legal Framework for Impact analysis.
Whereas ESG integration is the practice of using sustainability data to inform investment decisions and shield portfolios from sustainability risks, acting with the intent to have a positive impact is “investing for sustainability impact (IFSI)”. In clearly establishing intent and objectives, the Legal Framework for Impact report identified two approaches to IFSI: Instrumental, where the sustainability impact is “instrumental” in realising the investor’s financial goals, and ‘Ultimate Ends’, where the impact sought is a goal pursued alongside the investor’s financial goals.
An increasing number of investors across jurisdictions are seeking to address financially material sustainability risks both due to changes in financial policy and regulations, and a growing recognition of the systemic risks and opportunities associated with issues such as climate change, biodiversity loss, and social issues and human rights. PRI, UNEP FI and The Generation Foundation hope that this paper will provide investors with tangible, simple steps to pursue impact and manage those systemic and portfolio-level sustainability challenges.
Commenting on the report, Margarita Pirovska, Director of Global Policy at PRI said: “The finance industry has made good progress in understanding and managing sustainability risks relevant to their business. We have seen commitments to formalise such approaches both in policy reform and investment practice across many jurisdictions. The Legal Framework for Impact project showed that the debate is shifting from whether investors should consider sustainability outcomes at all, to asking why – and how – investors can play an effective role in addressing proactively sustainability challenges, as relevant to their duties and obligations. This guidance provides a clear, actionable framework for institutional investors to take action effectively and in line with their own financial objectives.”
ESG Integration, Instrumental IFSI and Ultimate Ends IFSI are all approaches that are supported by the Progression Pathways currently in development by PRI. These tailored pathways support signatories in progressing their responsible investment practices, directing them towards guidance, collaborative initiatives and education most relevant to their objectives.
Commenting on the report, Grace Eddy, Director of the Generation Foundation said: “This Investor Guide provides practical steps for asset owners and managers to better implement the findings of A Legal Framework for Impact. It is increasingly difficult to ignore the materiality of systemic risks like climate change and economic inequality, yet most mainstream investors are not deploying all the tools at their disposal to manage those challenges on behalf of their clients and beneficiaries. This guide provides a structure to help investors to achieve their goals, fulfil their legal duties and better serve their clients and beneficiaries.”
Media Enquiries:
Surina Martin, Press Officer at Principles for Responsible Investment
The Generation Foundation
The Generation Foundation is a UK registered charity and was established in 2004. The Generation Foundation uses strategic research, grant-making and advocacy to unlock the power of capital markets to drive a more sustainable economic system. It shares its vision with Generation Investment Management: a sustainable world in which prosperity is shared broadly in a society that achieves wellbeing for all, protects nature and preserves a habitable climate.
