There is potential for investors to contribute to poverty reduction and sustainable development and to help build consensus on the corporate responsibility performance of companies, say Helena Viòes Fiestas and Rory Sullivan
Over the past two years, Oxfam has engaged with over 80 institutional investors – pension funds, asset managers and insurance companies – in Europe and the United States.
Oxfam’s aim was understand the contribution that these institutional investors have made to poverty reduction and to explore how they can play a greater role in the future.
Research for the project and resulting report – Better Returns in a Better World – uncovered a number of encouraging results.
Three are particularly noteworthy. First, the argument that investors have social and environmental responsibilities is increasingly accepted with, for example, over 800 investors having now signed the UN-backed Principles for Responsible Investment (PRI).
Second, there are a series of concrete cases where investors have already made a contribution to poverty reduction and development. These include investors’ work on revenue transparency, access to medicines, labour standards, and bribery and corruption.
Third, virtually without exception, the investors interviewed as part of the Better Returns in a Better World project agreed that poverty reduction should be an integral part of their responsible investment activities.
Lack of structure
Yet, for all this, poverty reduction and development are not currently systematically addressed in investment practice. To date, work on these issues has been relatively ad hoc, triggered by media reports or civil society campaigns rather than starting from a structured analysis of development issues as a whole.
In the Better Returns workshops and meetings, investors stressed that internationally agreed frameworks on issues such as labour standards, bribery and corruption, cluster bombs and controversial weapons have been critical in enabling them to integrate these issues into their investment and engagement processes.
This clarity enables investors identify, and avoid, companies that breach or are at risk of breaching agreed norms of good practice.
Furthermore, clarity around expectations helps investors focus their engagement on encouraging laggards to improve, while also rewarding leaders.
Clear frameworks
The central conclusion from the Better Returns project is that if we expect investors to play a meaningful role in efforts to alleviate poverty, there is a need for clear normative frameworks that set out the expectations of companies (and of their investors) in relation to the issues in question.
Particularly pressing areas are arms transfers (and expectations of the defence sector in general), the management of water in water-stressed and water constrained areas, and access to land (in particular, when investors purchase land in developing countries).
These are priority campaigning issues for Oxfam. And Oxfam is calling on investors to lend their support to the proposals for a comprehensive and binding UN arms trade treaty, which, if passed, should provide a robust framework for defining the corporate responsibilities of the defence sector.
Resource security
Access to water and food security are integral elements of Oxfam’s forthcoming campaign on food justice in a world where natural resources are constrained.
Defining expectations of companies and investors in relation to these issues will be a central part of the research for this campaign.
The final message from the project is that there is a very clear case for investors to support credible and constructive action on these issues.
As western investors increasingly search for investment opportunities in emerging markets, the manner in which they address the social and environmental challenges that will inevitably be encountered will be a critical determinant of their long-term investment success.
This, in turn, suggests that investors need to encourage governments and key stakeholders to start the process of developing appropriate frameworks (and improving legislation) in these areas.
Investors should also actively participate in and support the development of such frameworks, and monitor and evaluate the performance of the companies in which they have invested against these frameworks.
Helena Viòes Fiestas is policy adviser at Oxfam and the Oxfam lead on the Better Returns in a Better World project. Rory Sullivan is the investor lead on the Better Returns in a Better World project and a member of the Ethical Corporation advisory board. The final report from the Better Returns in a Better World project as well as the briefing papers and other materials produced in course of the project can be found at: http://www.oxfam.org.uk/resources/policy/private_sector/better-returns-better-world.html