3.5.3 PRI and UNEP FI Fiduciary Responsibility Report

Since publication of the Freshfields Report, there has been more innovation and evolution in the field of ESG integration. The launch of the PRI in 2006 by then UN Secretary-General Kofi Annan was a significant development. The PRI considers itself an investor initiative in partnership with UNEP FI and the UN Global Compact' and a framework to help investors achieve better long-term investment returns and sustainable markets through better analysis of environmental, social and governance issues in the investment process and the exercise of responsible ownership practices'. With over 550 signatories from the institutional investment community, including many of the world's largest pension funds, collectively representing approximately USD 18 trillion in assets under management, the PRI is helping to identify best practices among investors.1

Furthermore, UNEP FI published a sequel to the Freshfields Report in 2009, entitled "Fiduciary Responsibility. Legal and Practical Aspects of Integrating Environmental, Social and Governance Issues into Institutional Investment" (Fiduciary II).2 This new report provides updated information on the legal ramifications of ESG criteria in investment management. Fiduciary II states that professional investment advisors and service providers to institutional investors - such as investment consultants and asset managers - may have a far greater legal obligation to incorporate ESG issues into their investment services or face "a very real risk that they will be sued for negligence" if they do not.3 The report also provides indicative legal language that can be used to embed ESG considerations in the investment management agreements and related legal contracts between institutional investors and their asset managers.