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Better Returns in a Better World: Responsible investment – overcoming the barriers and seeing the returns

Better Returns in a Better World: Responsible investment – overcoming the barriers and seeing the returns

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Published by Oxfam
This paper summarises a two-year research engagement project with the investment community on their role in contributing to poverty reduction and sustainable development. Oxfam undertook this research because we recognise the enormous influence investors have on poverty and development both as capital allocators – where and in what they invest - and as major influencers of companies and public policy. The role of investors in tackling social development issues is becoming increasingly important as the centre of gravity of the investment industry is moving slowly but inexorably towards emerging markets, including the growing interest within the investment community in natural resources ,such as farmland, on which the livelihoods of millions of poor people depend.
Oxfam has engaged with over 80 investors across Europe and United States to analyse jointly the role of institutional investors through the lenses of seven poverty-related topics. Despite the increasing consensus amongst investors of the importance of paying attention to social, environmental and governance issues: The social aspect (particularly poverty and development issues) has lagged behind. Most contributions have emerged in response to NGO campaigns, thus, there is a need for a more structured and holistic approach to development and poverty issues. The report identifies a series of obstacles that limit the extent to which development and poverty issues are considered as an integral part of investors’ analysis, decisions and engagement. Barriers include structural problems – lack of demand from asset owners, short-termism and a lack of transparency in the investment industry; and a set of more technical aspects such as the lack of agreed norms or international standards on companies’ performance around development and poverty issues. Oxfam concludes that investors can and should do much more even in the prevailing context. Yet, there are clear limits to the extent investors can and will integrate development and poverty issues in their investment decisions in the absence of clear regulatory frameworks or incentives in relation to which governments have a critical role to play.
This paper summarises a two-year research engagement project with the investment community on their role in contributing to poverty reduction and sustainable development. Oxfam undertook this research because we recognise the enormous influence investors have on poverty and development both as capital allocators – where and in what they invest - and as major influencers of companies and public policy. The role of investors in tackling social development issues is becoming increasingly important as the centre of gravity of the investment industry is moving slowly but inexorably towards emerging markets, including the growing interest within the investment community in natural resources ,such as farmland, on which the livelihoods of millions of poor people depend.
Oxfam has engaged with over 80 investors across Europe and United States to analyse jointly the role of institutional investors through the lenses of seven poverty-related topics. Despite the increasing consensus amongst investors of the importance of paying attention to social, environmental and governance issues: The social aspect (particularly poverty and development issues) has lagged behind. Most contributions have emerged in response to NGO campaigns, thus, there is a need for a more structured and holistic approach to development and poverty issues. The report identifies a series of obstacles that limit the extent to which development and poverty issues are considered as an integral part of investors’ analysis, decisions and engagement. Barriers include structural problems – lack of demand from asset owners, short-termism and a lack of transparency in the investment industry; and a set of more technical aspects such as the lack of agreed norms or international standards on companies’ performance around development and poverty issues. Oxfam concludes that investors can and should do much more even in the prevailing context. Yet, there are clear limits to the extent investors can and will integrate development and poverty issues in their investment decisions in the absence of clear regulatory frameworks or incentives in relation to which governments have a critical role to play.

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Published by: Oxfam on Aug 18, 2011
Copyright:Attribution Non-commercial

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05/12/2014

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Better returns ina better world
Responsible investment: overcoming thebarriers and seeing the returns.
Authors:
Helena Viñes Fiestas, Rory Sullivan and Rachel Crossley
www.oxfam.org
 
Contents
Foreword 3Introduction 4Why investors should seek to contribute to poverty reduction 8
How investors can inuence poverty reduction and sustainable development 12Barriers to greater consideration of development issues in investment 20Conclusions and recommendations 30
The authors gratefully acknowledge the help and support of Penny Fowler, Oxfam GB
 
Foreword by Dame Barbara Stocking,Chief Executive, Oxfam GB
Some readers may be surprised to learn thatOxfam has been working with institutionalinvestors (pension funds, insurance companies,investment managers) in the City of London
and other nancial centres over the past two
years. We have done so as part of our broader engagement with the private sector, andbecause we recognize the potential role of the
nancial sector in mobilizing resources and
investing in ways that reduce poverty.Of particular importance in determining whether,and the extent to which, private investmentdelivers positive development impacts are thedecisions that investors make about
where
toinvest,
what activities or sectors
to invest in, and
the extent to which
investment decisions takeaccount of social and environmental, as well as
nancial returns. Investors can also play a very
important role in encouraging the companiesin which they invest to take a proactiveapproach to the management of their social andenvironmental impacts.Our dialogue with investors has taken oneven greater importance with the increasedinterest being shown by institutional investorsin developing country markets. These investorsare looking to invest directly in companiesthat rely on these markets for inputs, workers,knowledge and sales, and in natural resourcessuch as farmland on which the livelihoods of millions of poor people depend. Investors areincreasingly aware that their success is criticallydependent on their ability to demonstrate thatthey can contribute to reducing, rather thanexacerbating, the major challenges facing thesecountries, including poverty and increasingcompetition for scarce natural resources.In this context, Oxfam welcomes the growingnumber of development-related initiatives inwhich investors are involved. These includethe UN Principles for Responsible Investment(UN PRI), which aim to develop and promotebest practice on responsible investment, theEuropean Institutional Investors Group onClimate Change (IIGCC), which has been inthe forefront of calls for a strong global climatechange treaty, and investor support for theExtractive Industries Transparency Initiative(EITI). Yet in spite of these and other positiveexamples, much more can and should be done.Our view is that the majority of investors haveyet to integrate social and development issuesin their investment decisions or their dialoguewith companies in a systematic way.That said, we recognize that investors can onlydo so much on their own. Governments have acritical role to play in establishing appropriateregulatory frameworks to encourage or requireinvestors to be accountable for the developmentimpacts of their investment decisions.Governments have an equally critical role inensuring that natural resources are managedin the best interests of society as a whole,
that the development benets of investment
are maximized, and that human rights areprotected. The UN Protect, Respect andRemedy Framework for Business and HumanRights aims to provide guidance and supportat the international level to help states achievegreater policy coherence in this area.
1
 Oxfam has greatly appreciated the high levelof interest and active participation of investorsin the Better Returns in a Better World project.We will continue to engage with the investmentcommunity as it is our belief that, not only doinvestors face a moral obligation to take actionon poverty, but there is also a compelling long-term commercial case for them to do so. We willalso continue to engage with governments onthese issues given their critical role in regulating
nancial markets in the public interest.
Dame Barbara StockingChief Executive, Oxfam GB
THREE

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