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A Principled Response to the Financial Crisis
By Steve Schueth

The Board of the UN Principles for Responsible Investment (PRI) has released an eight-point plan that provides a robust framework for investors in their response to the current economic crisis.

The PRI Board statement on the financial crisis calls on institutional investors to increase their involvement in activities that enhance understanding of environmental, social, and corporate governance (ESG) issues, and encourages them to work together to improve risk management practices and create a culture of active ownership.

Donald MacDonald, Chair of the PRI Initiative, said, “We believe this current crisis could have a catalytic effect of shifting the mainstream investment sector towards more responsible investment practices. Institutional investors can make a positive contribution to rebuilding trust and confidence by taking action in support of our eight-point plan.”

In mid-February, the Private Equity Council (PEC), a research organization established to develop, analyze, and distribute information about the private equity industry, announced that its members have adopted the PRI framework for incorporating ESG issues into investment decision-making and ownership practices.

PEC members include many of the world’s largest and best-known private equity firms, including Apollo Global Management, The Carlyle Group, and Kohlberg Kravis Roberts & Co.

The PRI-based guidelines adopted by PEC members include

  1. consideration of environmental, public health, safety, and social issues when evaluating whether to invest in a particular company;
  2. engagement with relevant stakeholders either directly or through representatives of portfolio companies; and
  3. the use of governance structures that provide appropriate levels of oversight in the areas of audit, risk management, and potential conflicts of interest.

First Affirmative was an early signatory to the PRI, which has now attracted global investors responsible for more than $10 trillion.

Affirmative Thinking Spring 2009,Volume 11, Issue 2

Posted: April 10, 2009