ShareAction’s new guidance manuals redefine responsible investment 

Prominent responsible investment charity ShareAction has recently published the first in a series of instructive manuals that outlines a new framework for responsible investment practices. Aimed at asset managers worldwide, the guidelines set the bar higher, demanding a proactive approach to addressing adverse impacts on society and our environment caused by investments.

ShareAction’s innovative take on responsible investment launched last week, presenting a revised definition that challenges institutional investors to acknowledge and address the real-world repercussions of their financial activities. This fresh perspective anchors on four pillars of responsible investment:

Transparency: Clear, open communication and visibility of actions.

Consistency: Application of responsible practices across all activities.

Comprehensive Impact Consideration: Recognition of both the negative and positive effects on people and the environment.

Seriousness: Treating these impacts with the same gravity as risk and return.

RISE Paper 1: Pioneering robust net zero targets

As part of ShareAction’s new Responsible Investment Standards and Expectations (RISE), the first guidance paper, titled “How asset managers can set interim net zero targets that are fit for purpose,” offers a blueprint for establishing formidable emissions objectives. By doing so, asset managers can guide companies in their portfolios towards decarbonisation at the scale and speed necessary to maintain global temperature rises within 1.5°C.

While the Net Zero Asset Managers’ initiative (NZAMi) has seen some asset managers commit to net zero targets, ShareAction highlights critical issues with the current structures of these targets. These problems could derail the reduction of emissions by 50% by 2023, a cornerstone of the NZAMi pledge and an essential milestone towards 1.5°C.

Expectations for asset Managers in five steps

To rectify these issues, ShareAction’s guidance lays out five expectations for asset managers:

  1. Advocate for a universal approach to emissions reporting and interim target setting.
  2. Increase transparency concerning assets not currently within targets and outline plans for their inclusion.
  3. Use a decrease in absolute, real-world emissions as the primary metric for reporting and setting targets.
  4. Emphasise real-world impact in net zero targets, underpinned by revealing portfolio companies’ contribution to emission targets.
  5. Reflect the geographical and sectoral diversity of the portfolio when setting targets, urging increased ambition for companies in the Global North. In contrast, companies in the Global South, grappling with lesser capital access and greater demand growth, are anticipated to decarbonise at a slower pace.

A call for government action

Beyond these expectations, ShareAction is calling for comprehensive governmental action. The regulatory environment needs to be equipped to maximise finance’s potential to mitigate detrimental impacts on people and our planet. This includes mandatory transition plans for all large companies and a more inclusive interpretation of fiduciary duties ‘best interests’ to incorporate social and environmental factors alongside financial return.

With this guidance, ShareAction is marking out a new frontier for responsible investment, challenging asset managers to be more proactive, transparent, and ambitious in their approach. By providing the road map, ShareAction is empowering asset managers to step up, make a difference, and lead the charge towards a sustainable future.

Read Guidance Paper #1 here.

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