The UK’s investment regulation should be reformed so that fiduciary duties for investors include a consideration of climate change and ESG (environmental, social and governance) issues.
The call comes from the UN Principles for Responsible Investment (PRI) group in response to an investigation by MPs into how to improve green investment.
In a written submission to the environmental audit select inquiry, the PRI said: “The Department for Work and Pensions should amend the Investment Regulations to clarify that fiduciary duty requires them to pay attention to long-term factors (including climate change and ESG factors) in their decision making, and in the decision making of their agents.”
The PRI also wants the Financial Reporting Council to make changes to the stewardship code for investors so that it makes explicit reference to ESG.
The PRI also called on government to begin a process that would see guidelines issued by a G20 Task Force on Climate-related Financial Disclosures (TCFD) integrated into UK regulation and codes.
The PRI said there was a shortfall in funding to deliver the UN’s Sustainable Development Goals. “Demand for green finance remains insufficient, with an estimated $2-3 trn per annum funding gap between current spend and what is needed to deliver the Sustainable Development Goals and climate goals.
“The UK green finance taskforce and EAC’s inquiry is an opportunity to leverage capital markets to support the delivery of UK policy goals and consolidate UK leadership in developing new green financial markets.”