Financial Markets

Recent events in global financial markets underscore the importance of transparency, accountability, and a focus on long-term investment horizons over “short-termism”. The crisis also demonstrates that due to economic integration, a crisis in one part of the world can quickly spread to other regions. In the same way, many social and environmental challenges do not respect national borders, placing a premium on an expanded view of risk management to include extra-financial issues.

Indeed, a new term has entered the lexicon of finance: “ESG”, for environmental, social and governance issues. This term and the underlying concept were first proposed by the UN Global Compact’s “Who Cares Wins” initiative in June 2004 as a way of focusing mainstream investors and analysts on the materiality of and the interplay between these issues – be they related to climate change, water, human rights or anti-corruption, to name just a few.

Through such efforts as “Who Cares Wins”, collaboration between the UN Global Compact with International Finance Corporation and the Government of Switzerland, and the United Nations Environment Programme’s (UNEP) Finance Initiative, a new paradigm has emerged – investors and analysts evaluating companies and other assets on their ESG performance as a qualitative and quantitative piece of fundamental analysis. The underlying premise is this: companies that proactively manage ESG issues are better placed vis-à-vis their competitors to generate long-term tangible and intangible results – and therefore are better investment bets. In addition, such an approach better aligns investors’ interests with broader societal goals.

Financial markets have witnessed the development and growth of the Principles for Responsible Investment, an initiative developed by the UN Global Compact and the UNEP Finance Initiative. Launched in April 2006 at the New York Stock Exchange, the PRI invites large institutional investors – both asset owners (e.g. pension funds, endowments) and asset managers – to commit to a set of six principles designed to put ESG issues into the core of investment decision-making.

Taken together, these efforts – in combination with other important global projects such as the IFC’s Equator Principles and the Carbon Disclosure Project – are helping to sensitize capital markets to the importance of ESG issues, and should be a major force in driving the corporate sustainability movement to even higher levels.

Publications

Who Cares Wins Initiative

Other Publications

Documents & Standards

Further Links

News

Human dignity will be “the core of my work,” says UN Secretary-General António Guterres
On 12 December 2016, António Guterres was sworn in as the next United Nations Secretary-General. In his vision for the post, Mr. Guterres – a former Prime Minister of Portugal and UN High Commissioner for Refugees – has said that the world body is uniquely placed to connect the dots to overcome global challenges and further strengthen the nexus between peace and security, sustainable development and human rights policies. Read more...

Electrica joined Global Compact Network Romania
Electrica SA, the only romanian company in electric power distribution and supply of Romania, signed the UN Global Compact and joined Global Compact Network Romania. Read more...

UNGC Unveils “Making Global Goals Local Business” Strategy to Drive Responsible Business Activity on SDGs
The UN Global Compact unveiled a multi-year strategy to drive business awareness and activity that supports the achievement of the Sustainable Development Goals (SDGs) by 2030. Read more...

The six steps to make for achieving the SDGs
Achieving the Sustainable Development Goals (SDGs) calls for concerted efforts to stimulate private sector investment in numerous SDG-linked sectors: infrastructure development, health and education, agriculture and food security, and a host of other areas of social, environmental and economic challenges. Read more...

Now open: the public consultation about the national anticorruption strategy
The Ministry of Justice just opened the public consultation about the national anticorruption strategy. This initiative follows Principle 10 of the Global Compact Network, concerning the anticorruption fight in public and private organizations. Read more...