The report’s recommendations can be summarized as follows:
• Analysts are asked to better incorporate environmental, social and governance (ESG) factors in their research where appropriate and to further develop the necessary investment know-how, models and tools in a creative and thoughtful way. Based on the existing know-how in especially exposed industries, the scope should be expanded to include other sectors and asset classes. Because of their importance for sustainable development, emerging markets should receive particular consideration and environmental, social and governance criteria should be adapted to the specific situation in these markets. Academic institutions, business schools and other research organisations are invited to support the efforts of financial analysts by contributing high-level research and thinking.
• Financial institutions should commit to integrating environmental, social and governance factors in a more systematic way in research and investment processes. This must be supported by a strong commitment at the Board and senior management level. The formulation of long-term goals, the introduction of organisational learning and change processes, appropriate ii Financial Sector Initiative Who Cares Wins training and incentive systems for analysts are crucial in achieving the goal of a better integration of these issues.
• Companies are asked to take a leadership role by implementing environmental, social and corporate governance principles and polices and to provide information and reports on related performance in a more consistent and standardised format. They should identify and communicate key challenges and value drivers and prioritise environmental, social and governance issues accordingly. We believe that this information is best conveyed to financial markets through normal investor relation communication channels and encourage, when relevant, an explicit mention in the annual report of companies. Concerning the outcomes of financial research in this field, companies should accept positive as well as critical results.
• Investors are urged to explicitly request and reward research that includes environmental, social and governance aspects and to reward well-managed companies. Asset managers are asked to integrate research on such aspects in investment decisions and to encourage brokers and companies to provide better research and information. Both investors and asset managers should develop and communicate proxy voting strategies on ESG issues as this will support analysts and fund managers in producing relevant research and services.
• Pension fund trustees and their selection consultants are encouraged to consider environmental, social and governance issues in the formulation of investment mandates and the selection of investment managers, taking into account their fiduciary obligations to participants and beneficiaries. Governments and multilateral agencies are asked to proactively consider the investment of their pension funds according to the principles of sustainable development, taking into account their fiduciary obligations to participants and beneficiaries.
• Consultants and financial advisers should help create a greater and more stable demand for research in this area by combining research on environmental, social and governance aspects with industry level research and sharing their experience with financial market actors and companies in order to improve their reporting on these issues.
• Regulators are invited to shape legal frameworks in a predictable and transparent way as this will support integration in financial analysis. Regulatory frameworks should require a minimum degree of disclosure and accountability on environmental, social and governance issues from companies, as this will support financial analysis. The formulation of specific standards should, on the other hand, rely on market-driven voluntary initiatives. We encourage financial analysts to participate more actively in ongoing voluntary initiatives, such as the Global Reporting Initiative, and help shape a reporting framework that responds to their needs.
• Stock exchanges are invited to include environmental, social and governance criteria in listing particulars for companies as this will ensure a minimum degree of disclosure across all listed companies. As a first step, stock exchanges could communicate to listed companies the growing importance of environmental, social and governance issues. Similarly, other self-regulatory organizations (e.g. NASD, FSA), professional credential-granting organizations (e.g. AIMR, EFFAS), accounting standard-setting bodies (e.g. FASB, IASB), public accounting entities, and rating agencies and index providers should all establish consistent standards and frameworks in relation to environmental, social and governance factors.
• Non-Governmental Organisations (NGOs) can also contribute to better transparency by providing objective information on companies to the public and the financial community.