A process headed by the United Nations, more than 70 experts and over 20 of the largest institutional investors came up with the six principles , according to Mercer Investment Consulting, which served as the UN’s consultant on the project.
“While environmental, social, and corporate governance factors are increasingly perceived as having an impact on corporate financial performance, they are rarely incorporated into investment decision-making,” said Tim Gardener, Global Head of Mercer IC, in a statement. “This leaves room for corporate scandal, environmental degradation, and human rights abuses – all of which can affect both a company’s bottom line and its share price.”
In a ceremony on April 27, more than 30 leading investors from 15 countries, signed on to the Principles during a ceremony presided over by UN Secretary General Kofi Annan at the New York Stock Exchange.
According to Mercer, a number of pension funds were among those signing including some big names including CalPERS, the Norwegian Government Pension Fund, Canada Pension Plan Investment Board, ABP, the Guardians of New Zealand Superannuation Fund.
Despite some resistance to socially responsible investments, some evidence exists that these investments have outpaced managed assets in the US during the last decade from $639 billion in 1995 to $2.29 trillion in 2005 (See SRI Asset Growth Outpaces Other Managed Investments ). Institutional investors are beginning to see that SRI considerations do affect investment performance, but fear stakeholder demand is lacking and that they could result in lower returns and higher risk, at a higher cost, according to a Mercer survey released in January (See Social Investing Can Boost Performance, but Roadblocks Exist ).