The OECD has undertaken a stocktake of regulatory frameworks and how they translate into the responsibility and opportunity for institutional investors to integrate ESG factors into their decisions.
The Organisation for Economic Co-operation and Development’s report, Investment Governance and the Integration of Environmental, Social and Governance Factors, allows for a comparison of how different countries and investors are reconciling ESG analysis with prudential, risk-based regulations.
The paper examines how pension funds, insurance companies and asset managers approach ESG risks and opportunities in their portfolios, and the extent to which current legal and regulatory frameworks encourage or discourage them from integrating ESG factors into investment decision-making.
Out of 31 countries in the report, 10 required pension funds to disclose their approach to ESG investing, and five required asset managers to disclose their approach. France had the most extensive reporting standards for institutional investors, requiring information on ESG integration and also on climate risks and how investors’ portfolio construction assists the transition to a low-carbon economy.
The OCED report states that 15 countries and jurisdictions have stewardship codes. It also details the differences among investors in how they integrate ESG factors, how that integration influences investment performance, and their evolving views on good investment practice and fiduciary duty.
The full report is available here