Is high finance growing a social conscience?

A growing group of financiers is embracing ethical investment strategy, known as responsible investing or environmental, social and governance investing, a new report shows.

Financiers who turnaround companies by injecting them with capital are increasingly considering the environmental and social impact of their investments, according to a survey published today by consulting firm PwC.

The survey found a growing cohort of these financiers, called private equity firms, have embraced this ethical investment strategy, known as responsible investing or environmental, social and governance (ESG) investing.

For a long time, responsible investing was a niche strategy within finance. But increasingly investors are waking up to the fact that they can do good as well as achieving financial returns.

PwC polled 162 finance companies from 35 countries, including 145 private equity companies, for its fourth Private Equity Responsible Investment Survey.

It found 91 per cent of respondents have adopted or are developing responsible investment policies, up from 80 per cent in 2013.

What we are seeing in the market, including private equity, is more and more firms hang their sustainability strategies—or ESG strategies—around the SDGs, so they are being seen as a very useful framework.

Phil Case, director, PwC

Meanwhile, 35 per cent of the firms polled has formed in-house teams to ensure their investments are responsible.

“This is really showing they are taking responsible investment seriously and it is becoming more mainstream,” Phil Case, a director at PwC and co-author of the report, told the Thomson Reuters Foundation.

The survey also showed a growing awareness among financiers of the United Nation’s Sustainable Development Goals (SDGs), a series of targets to combat global problems, such as poverty, hunger, gender inequality and climate change.

According to the survey, 67 per cent of respondents selected development goals to tackle that are relevant for the businesses they invest in. In 2016—the year after the SDGs launched—just 38 per cent did this.

“What we are seeing in the market, including private equity, is more and more firms hang their sustainability strategies—or ESG strategies—around the SDGs, so they are being seen as a very useful framework,” said Case.

However, he warned that there is scope for financiers to exaggerate their allegiance to the development goals. “Not all firms are taking the SDGs as seriously as others,” he said.

The survey showed that human rights and climate change were also high on the agenda for the private equity community.

It found 76 per cent of respondents said they were concerned about human rights issues, such as poor labour practises within supply chains.

Meanwhile, 83 per cent are concerned about the impact climate change could have on the businesses they invest in.

This story was published with permission from the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s and LGBT+ rights, human trafficking and slavery, property rights, social innovation, resilience and climate change. Visit http://news.trust.org to see more stories.

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