Articles / OECD: Responsible Business Conduct for Institutional Investors
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OECD: Responsible Business Conduct for Institutional Investors
Are you an investor? Then you can read this summary of OECD’s paper; Responsible Business Conduct for Institutional Investors.
We will cover the papers key considerations for due diligence under the OECD Guidelines for Multinational Enterprises, which can help institutional investors to implement the due diligence recommendations for institutional investors.
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Investment and the OECD
The Investor Perspective:
Overall, investors must take a human-centric approach to decent working conditions to meet OECD guidelines.
The Employee Perspective:
Employers must think beyond employment as a monetary transaction and consider employees as human capital. Shifting the focus to economic dignity and workers’ development is very important.
The Paper of Responsible Business Conduct for Investors
Included in the paper you’ll find the most important actions to consider for asset managers and asset owners. Included in each step of the due diligence process there are considerations, such as challenges, existing practices, or regulations specific to the investment sector which may impact due diligence approaches.
Institutional Investors and Stewardship
Sustainable growth is very relevant to investors assets under management, especially with the growing use of passive investment strategies. As existing frameworks might not adequately adress the issues related to investor engagement and disclosure, there has been an increase in regulation to enhance their transparency and adresses conflicts of interest, the adpotion of stewartship codes and the number of signatories.
The paper explores the apparent increase in engagement among institutional investors with respect to environmental, social and governance (ESG) issues, and wether regulatory frameworks or guidance should evolve to take into account these new developments.
Their proliferation and convergence offers insights on recognised best practices.
Impact on Investments
By carrying out due diligence in line with the OECD Guidelines, investors will be able to avoid negative impacts of their investments on society and the environment.
Investors can also avoid financial and reputational risks, respond to expectations of their clients and beneficiaries, and contribute to global
goals on the climate and a sustainable development. Increasing, failing to consider long-term investment value drivers, which include environmental, social and governance issues in investment practice, is seen to be a failure of fiduciary duty.
Since the introduction of the Paris Climate Agreement in 2015, investors have been facing increasing expectations to manage climate risks in their portfolios. International financial institutions have also signalled plans to mobilise $400bn towards achieving the UNs Sustainable Development Goals (SDGs).
Strong due diligence processes can help ensure that investments are put towards projects.
Are you an investor? You can read the entire paper here.
Due Diligence in line with OECD Guidelines for Multinational Enterprises
The paper covers key consideratinos for due diligence under the OECD Guidelines for multinational enterprises. It helps institutional investors implement the due diligence recommendations in order to prevent adverse impacts related to human and labour rights, the enviorement, and corruption in their portfolios.
Key Factors for Asset Managers
Key factors for asset managers and owners has been identified in each step of the due diligence process, thereby promoting regulations specific to the investment sector which may impact various due diligence approaches.
By adhering to these guidelines investors will be able to reduce negative impacts of their investments across the enviornment, financial risks and reputation.
Rising International Expectations
Important clients will have expectations to the investors regarding global goals on climate and sustainable developement.
After the Paris Climate Agreement in 2015 was introduced, investors have faced increased expectations to manage all these risks in their portfolios.
International financial institutions are also heading to wards a higher standard of due diligence.
You can read the full Guidelines in several languages below:
Responsible Business Conduct for Institutional Investors
The OECD Guidelines:
OECD Corporate Governance Working Papers
The ILO Declaration for Multinational Enterprises and Social Policy:
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