- Shaping a modern interpretation of fiduciary duty, which in turn has been key in winning over investors to get serious about the integration of environmental, social and governance (ESG) issues into analysis and decision-making.The 2005 “Freshfield” report by UNEP FI was a game changer which, together with the 2005 report “Who Cares Wins” by the UN Global Compact (which established the business case and coined the term “ESG”) prepared the ground for the creation of the UN-backed Principles for Responsible Investment (PRI).One year later, former UN Secretary General Kofi Annan launched the UN-backed PRI at the New York Stock Exchange with the help of both organisations. The PRI is today a thriving global initiative involving over 1,500 investors representing over US$70 trillion.
- In 2012, UNEP FI launched the “Principles for Sustainable Insurance”, now involving 25 per cent of global premium, a learning and action platform that fosters ESG integration and the creation of sustainable underwriting policies.A host of concrete actions has already been generated, such as a collaboration to no longer insure assets that are involved in illegal fishing. Other activities are aimed at providing affordable insurance in the poorest countries to protect against climate related impacts such as droughts.
- With its “Natural Capital Finance Alliance, UNEP FI has helped to improve risk management for ecosystems through a variety of approaches, such as Corporate Bonds Water Credit Risks and Drought Stress testing.
- In the run-up to the Paris Climate Accord, UNEP FI gave impetus to carbon disclosure practices and was involved in piloting the implementation of the G20 Task Force on climate related with 14 leading banks.UNEP FI’s work, however, evolved beyond just disclosure. Through the creation of the “Portfolio Decarbonization Coalition”, major steps have been taken by 29 major institutions to reduce carbon exposure of their US$600 billion assets under management.
- Other important milestones include the development of tools such as the “Energy Efficiency Toolkit”, advancing the UN Guiding Principles on Human Rights with the insurance and banking industry, and training several thousand financial professionals on ESG integration into risk frameworks.
Looking ahead, UNEP FI has great ambition. As sustainability is increasingly seen as a performance driver, and not just as a tool to mitigate risks, a new framework called “Principles for Positive Impact Finance” was established earlier this year with leading banks and investors. Inspired by the UN Sustainable Development Goals (SDGs), and the imperative to successfully implement the Paris Climate Accord, the aim is to deepen the alignment of financial products and services, especially from banks and insurers, with the goals of the global community.
Eric Usher, the head of UNEP FI, is confident that so much more can be accomplished now that that “we are beginning to see the recognition that sustainable finance is a race to the top, both in terms of managing risks and taking advantage of the opportunities that sustainable development offers”.
Multilateral collaboration is under stress in this current era, and many people in power are failing humanity for not providing the leadership the world so urgently needs.
UNEP FI faced a struggle in its early days to justify its very existence. Collaboration between the UN and the private sector was originally viewed with suspicion, and there was no blueprint to follow. With the creation of the UN Global Compact, however, collaboration with the private sector became more politically viable and operationally feasible.
Today, partnership between UN entities and the private sector has become an essential function of many UN entities. UNEP FI’s special role at the core of collaboration with the financial community is of particular relevance, and its mission more important than ever before.
Multilateral collaboration is under stress in this current era, and many people in power are failing humanity for not providing the leadership the world so urgently needs. It is hoped that the private sector will step up its efforts and fill some of the void. There is urgency behind this agenda. As Henrie de Castries, former chairman and chief executive officer of AXA, put it: “A 2°C world might be insurable, but a 4°C world certainly would not be.”
Happy 25th anniversary UNEP FI—and best wishes for a successful and transformative future!
Georg Kell is the founding director of the UN Global Compact and chairman of Arabesque.