Responsible investment is about better risk management, corporate governance and the monitoring of companies by investors. So says UN Principles for Responsible Investment (PRI) executive director, James Gifford, who also highlights that "catastrophic failure in corporate governance in the US” was part of the cause of the current credit crisis in the USA.

Today, governments are pumping money into the markets, while central banks are lowering interest rates, all in a bid to revive their economies. Nevertheless, these endeavours do not deal with the root of the problem.

Gifford says that many investors had believed in schemes that provided unrealistically high returns without realising the associated risks, or that they ignored the risks or pretended they did not exist. He explains that investors will remain cautious for the time being until "there is a consensus that the worse is over."

“In order for them to feel we have reached a bottom, we need to rebuild trust so that people will start lending and investing.” Gifford clarifies. He believes that the philosophy of the PRI is consistent with what is needed to rebuild faith and trust in the market.

The UN PRI initiative was established in 2006, with the vision to promote good corporate citizenship and to build more sustainable economies. Increasingly becoming recognised as a global benchmark for responsible investing, the PRI is a set of best practices that incorporates environmental, social and governance issues into its investment analysis, decision-making and ownership practices of investors worldwide.

 

This is aligned in the current trend that sees investors becoming more conscious of environmental, social and governance issues which influences the performance of corporate portfolios.

More than four hundred and fifity organisations, representing US$18 trillion worth of assets, have signed the PRI. Gifford says the number of signatories is growing, with about twelve new signatories signing up every month. However, Gifford reveals that the number of signatories from South-East Asia is not as encouraging, mainly because the PRI initiative has only recently started reaching out to this region.

Currently, only two institutions from Malaysia have been admitted as PRI signatories: OWW Consulting Sdn Bhd and Cornston-Smith. Other signatories from the South-East Asian region include the Government Pension Fund of Thailand and Singapore’s investment manager Infinity Energy and consultancy firm CSR Asia.