O SlideShare utiliza cookies para otimizar a funcionalidade e o desempenho do site, assim como para apresentar publicidade mais relevante aos nossos usuários. Se você continuar a navegar o site, você aceita o uso de cookies. Leia nosso Contrato do Usuário e nossa Política de Privacidade.
O SlideShare utiliza cookies para otimizar a funcionalidade e o desempenho do site, assim como para apresentar publicidade mais relevante aos nossos usuários. Se você continuar a utilizar o site, você aceita o uso de cookies. Leia nossa Política de Privacidade e nosso Contrato do Usuário para obter mais detalhes.
The Inevitable Friendship Between Lawyers and ESG Experts: From a Normative to a Compliance ESG Regulatory Framework
Chris Burkett | @burkett_chris
Baker & McKenzie LLP
Will Martindale | @WillJMartindale
UN-Supported Principles for Responsible
For professional investors only
Excellence. Responsibility. Innovation.
Sustainable Brands Conference 2015
An Introduction to Hermes Equity Ownership Services
The Inevitable Friendship Between Lawyers and ESG Experts:
From a Normative to a Compliance ESG Regulatory Framework
Source: Hermes EOS, 2015
Engagement Addresses all Actors in Society
Higher long term company ROI
Higher long term economic growth
• Policy Makers
• Civil Society Groups
• Industry Ass’ns
Market best practice
Broad (non-)financial objectives … … drive a broad (collaborative) engagement approach
Long term more stable, just society
SB - 2015
Engagement Themes Focus on the Trade-off of Short vs. Long Term
Area Engagement objective Short term cost Long term benefit
• Maintain capital discipline by avoiding
further balance sheet leverage
• Earnings per share does not rise • Reduced risk of insolvency
• Improved earnings in times of higher
cost of debt
Environment • Improve energy efficiency of operations • Additional non-capitalised investment depresses
• Highly certain return on investment
• Reduced regulatory risk from rising
energy costs/ cost of CO2
Social • Reduce level of fatalities • Additional investment for no cash return • Avoided lost earnings from loss of
reputation, lost ‘social licence to
operate’ or regulation; I
• Improve productivity
Governance • Increase independence of board • Effort to recruit and integrate new non-execs
• Broach subject of retirement
• Higher performing board that identifies
long term risks and opportunities for
Source: Hermes EOS, 2015
SB - 2015
Engagement and ‘Policy Integration’
Legal Frameworks for ESG, UK
3SB - 2015
Source: Eurosif, European SRI Study 2012
*Please note that The Law Commission published a final report “Fiduciary Duties of Investment Intermediaries” in July 2014, following a “Review on Equity Markets” by Prof. John Kay. It concluded that
trustees should take into account factors which are financially material to the performance of an investment, including over the long term. Where trustees think ethical or ESG issues are financially
material they should take these into account. In October 2014, the Government published its progress report on the implementation of the Kay Review. In it, the Government welcomed the Law
Commission’s conclusions on the consideration of long-term factors, as well as their view that trustees may make investment decisions based on non-financial factors in some circumstances.
Name Affects Type Introduced by Date introduced Description
The Occupational Pension Schemes
(Investment) Regulations –
Regulation 2(3) (and equivalent for
stakeholder pensions and charities)*
UK Parliament 1999 (in force since 2000)
regulation republished and
see also Pensions Act 1995
Requires occupational pension funds to disclose their
responsible investment policy in their ‘statement of
investment principles’. This requirement was
subsequently extended to ‘stakeholder’ pension
products and to charity investors.
Companies Act (primary legislation) UK Parliament 2006 Directors’ duties; business review (corporate
reporting); non-binding vote on remuneration report,
Institutional investors Act (primary legislation
UK Parliament 2006 Disclosure of records. Act enables the measure to be
introduced by regulation; currently no plan to do this.
UK Corporate Governance Code UK listed companies Listing rules UK Listing Authority
(UKLA), a division of the
2010-14 Listing rules require disclosure of compliance on
‘comply or explain’ basis.
UK Stewardship Code
Asset managers, asset
owners and service
Voluntary code Financial Reporting
Council (UK financial
2010 / 2012 Good practice standards on engagement with
companies, including associated issues such as
conflicts of interest and reporting.
(rules set by financial
Authority (UK financial
2010 / 2012 Mandatory disclosure of commitment to the
Stewardship Code on ‘comply or explain’ basis.
“Charities and investment Matters”
Charities Guidance Charity Commission (UK
2011 Guidance across the spectrum of potential investment
approaches, including on ESG risks, mixed motive
investing and programme-related investments.
Excellence. Responsibility. Innovation.
Hermes Investment Management
Hermes Investment Management is focused on delivering superior, sustainable, risk-adjusted returns – responsibly.
Hermes aims to deliver long-term outperformance through active management. Our investment professionals manage equity, fixed income, real estate and alternative portfolios
on behalf of a global clientele of institutions and wholesale investors. We are also one of the market leaders in responsible investment advisory services.
Our investment solutions include:
International Real Estate, Pooled funds, Segregated mandates, UK Real Estate, UK Real Estate Debt, Infrastructure, Private Equity.
High active share equities
Asia, Global Emerging Markets, Greater China, Europe, Global and Small & Mid Cap.
Specialist fixed income
Global High Yield Bonds, Illiquid Credit, Multi Strategy Credit, UK Government Bonds and UK & Global Inflation-Linked Bonds.
Multi Asset Inflation
Responsible Investment Services
Corporate Engagement, Intelligent Voting, Public Policy Engagement and PRI.
London | Singapore
United Kingdom +44 (0)20 7680 2121 Africa +44 (0)20 7680 2205 Asia Pacific +65 6808 5858 Australia +61 2 9924 6402
Canada +44 (0)20 7680 2136 Europe +44 (0)20 7680 2121 Middle East +44 (0)20 7680 2205 United States +44 (0)20 7680 2136
MANAGE RISKS, ENHANCE RETURNS,
BETTER FULFIL FIDUCIARY DUTY
“There are statistically
significant positive abnormal
returns associated with going
long good corporate governance
firms and shorting those with
Yale School of Management
outperformed the low-
sustainability ones in terms of
both stock market and
Harvard Business School
“We believe that ESG analysis should be built into the investment
processes of every serious investor and into the corporate strategy of
every company that cares about shareholder value.”
NOT JUST EXCLUDING UNETHICAL INVESTMENTS
NOT BREACH OF
“Failing to consider long-term
investment value drivers, which
include ESG issues, in investment
practice is a failure of fiduciary duty.”
PRI, UNEP FI Fiduciary Duty in the
! United Nations-supported Principles for Responsible Investment: http://www.unpri.org/
! The Sustainable Stock Exchanges Initiative: http://www.sseinitiative.org/
! Montreal Pledge: http://montrealpledge.org/
! Fiduciary Duty in the 21st Century:
! UK Law Commission: Fiduciary Duties of Investment Intermediaries:
! Keith Johnson, Introduction to Institutional Investor Fiduciary Duties:
! Al Gore, Navigating Sustainability:
! Reuters, Sustainable Investing is a Fiduciary Duty: