Responsible Investment Bill (UK)

The Responsible Investment Bill was proposed by responsible investment charity ShareAction and presented to Members of Parliament on November 5th 2020.

The bill will legislate the requirement for asset managers to incorporate environmental and social considerations into their investment decisions. It also obliges any funds marketed as ‘sustainable’ to meet set requirements that contribute to limiting climate change (aligned with the Paris Agreement to below 2°C) or risk facing regulator action.

Responsible investment is an investment strategy which integrates environmental, social and governance (ESG) factors into investment analysis and decisions. It recognises that ESG factors can have an impact on the financial value of an investment and also that investments have an impact on the world around us. A responsible approach to investment recognises that long-term prosperity requires a move away from short-term profit as the only definition of value.

The proposed Responsible Investment Bill would expand the legal duties of fiduciary investors, such as asset managers and pension trustees, to act in the best interests of their beneficiaries, by stipulating in law that ‘best interests’ include environmental and social considerations.

Following measures taken in Sweden and Norway, the bill would force investors to give greater attention to their environmental and social impacts of their activities and a UK Council for Investor Due Diligence would be created to research company practices and issue alerts and recommendations to investors. Asset managers would be required to respond within 60 days, explaining how they intend to mitigate or avoid complicity in serious violations of human rights or environmental crimes by investee companies.

Useful web links https://shareaction.org/responsible-investment/

Assessment

Although just a proposal for a bill at this stage the prospect of UK legislation regulating this aspect of market activity seems likely – especially given Brexit (and the need for the UK to remain competitive).