NGO proposes responsible investment bill to British MPs
Non-governmental organisation ShareAction on Thursday unveiled its proposal of a responsible investment bill to British MPs during an event organised by the All Party Parliamentary Group (APPG) on sustainable finance. This bill comes at a time responsible investment funds in the UK had posted a record net inflow of £7.1bn from retail savers for the first nine months of 2020, up £1.9bn year-on-year, according to the Investment Association's data.
ShareAction's proposed legislation, which is inspired from existing frameworks in certain European countries like Sweden, Switzerland and the Netherlands, aims at strengthening the legal duties of fiduciary investors to act in the best interests of their beneficiaries, by stipulating in law that ‘best interests’ include environmental and social considerations.
The proposed bill requires from pension schemes and asset managers that any ‘default’ funds and any funds marketed as ‘sustainable’ align with the Paris Agreement goal to limit climate change to below 2°C. The FCA and TPR would supervise this.
Moreover, the bill suggests the establishment of a UK Council for Investor Due Diligence regarding human rights and the environment. Such council “would research company practices and issue alerts and recommendations to investors, who 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.”
Transparency improvement, accountability of pension trustees to their beneficiaries as well as the implementation of enforcement powers through judicial redress remain among other goals pursued by ShareAction's proposed legal framework.
Commenting on the bill, Ed Davey, chair of the APPG and leader of the Liberal Democrats, said: “Government and regulatory action are needed to help us achieve our international climate commitments and to place the financial services sector on a more sustainable footing. This Bill represents a clear pathway to achieving that aim and I look forward to supporting it over the coming months and years.”
ShareAction's chief executive Catherine Howarth added: “We can and must ensure that the UK’s mighty investment industry does more to meet the long-term needs of ordinary savers, whilst avoiding investment decisions that cause grave environmental harm or violate human rights. This bill will make powerful institutional investors accountable and transparent about the decisions they make on behalf of so many of us. We commend it to every MP and look forward to engaging with the government on the big ideas it contains.”
ShareAction said it will work with MPs of all parties and civil society “to build widespread backing for the introduction of such a Bill before the end of the current parliament.”