Webinar: Responsible Investment – What does the future hold?

On 5 November, ShareAction published the Responsible Investment Bill. This is a model piece of legislation that creates a new regulatory framework for the UK investment system. The Bill was officially launched at a webinar chaired by Sir Ed Davey MP, Chair of the APPG for Sustainable Finance.

Catherine Howarth, CEO of ShareAction, led the session, explaining how the Bill will ensure investors take greater consideration of how social and environmental factors affect assets, and ultimately help build a better world for their ultimate beneficiaries to retire into.

Also speaking on our panel were Professor Oliver Hart, Nobel-prize winning economist at Harvard University; Sarah Gordon, CEO of the Impact Investing Institute; and David Rouch, financial lawyer at Freshfields.

The Bill would make a number of changes to facilitate responsible investment:

It widens the idea of ‘best interest’

The Bill makes clear that although investors are duty-bound to act in the ‘best interest’ of their clients, this is not strictly defined as maximising returns. The consequences of investments on the wider economy, communities and the environment are given equal consideration.

It embeds ‘double materiality’

Investors should not only factor in the risks of social and environmental issues on their investments, but also the impact of investment decisions on society and the environment. The Bill would establish a UK Council for Investor Due Diligence, which would deliberate on instances where investors have made serious detrimental impacts through their investments.

It aligns the sector with the Paris climate goals

The Bill would require investors’ ‘default’ funds and any ‘sustainable’ funds to align with the ambitions of the Paris Climate Agreement, to hold warming to below 2C and to strive for 1.5C.

It aims to build a transparent and accountable investment system

The Bill creates a more open investment system, so that investors are constantly working with their ultimate beneficiaries at the heart of their decision-making. It places new duties on investors to seek out their beneficiaries’ view, to use this information to inform their stewardship and investment decisions, and communicate those decisions back to customers. This in turn empowers and better informs savers to ask about how their money is being managed.

ShareAction publishes the Responsible Investment exactly one year ahead of the UK hosting the COP26 summit in Glasgow. This is a unique opportunity to show global leadership on the climate crisis, and to use the might of our capital markets to tackle it. In the coming months, we will engage policymakers across Government to put the provisions of our Bill into law to create a responsible investment system.