Introduction

By Daniel Beunza, Chair, PRI Academic Network Steering Committee and Assistant Professor of Management, LSE

The first article is an opinion piece by Danielle Chesebrough that makes a forceful argument for tangible investor presence in an active public policy process. All the signs are that investors would like to be more active, but that there are barriers ahead.

For that reason, the PRI is working with other UN institutions to find ways to overcome these barriers. The Sustainable Stock Exchanges initiative is particularly promising: my five years of fieldwork at the NYSE left me persuaded that exchanges are the key pipes of the global economy, and that shaping their policy is a promising way to shape the course of the financial system.

The second article looks at issue two of the International Integrated Reporting Council’s Creating Value series. It covers one of the most attractive developments in responsible investment: integrated reporting.

The argument for integration is compelling. Corporations’ problems with sustainability stem from: the inability of market prices to properly capture the impact of a decision; and the break-up of the decision hierarchy in the organisation. This fragmentation can be addressed by integrating sustainability reporting into mainstream financial reporting. The summarised account of the publication provided here marshals the report’s impressive array of quantitative evidence about the benefits of integration.

The third article presents the findings of an important working paper that has already made an impact in academic circles and been downloaded more than 30,000 times. By giving a compelling argument for making corporate sustainability reporting mandatory, Ioannis Ioannou and George Serafeim touch on one of the holy grails of responsible investment: an active public policy to make information freely available to all market actors.

Article four looks at Stefanie Kleimeier and Michael Viehs’s examination of the effects of CO2 emissions disclosure on the cost of corporate debt. They find that companies that voluntarily reveal their CO2 emissions paid significantly lower spreads on their bank loans. This is a powerful result, and one that should guide investors, managers and policy makers.

Michael Viehs has also been working hard with the Conference Committee on the upcoming PRI in Person and Academic Workshop.

The issue closes with Patricia Crifo, Vanina D. Forget and Sabrina Teyssier’s experiment with private equity investors. Their study finds that businesses with poor ESG behaviour are likely to suffer limited access to private equity and to incur a higher cost of capital. The paper was published in the Journal of Corporate Finance and first presented at one of our own conferences, the PRI-CBERN Conference in Toronto in 2012.

I hope you enjoy reading this issue of RI Quarterly as much as we at the PRI learnt working with these fascinating papers.