Legal Considerations
in Responsible Investment

United Nations-Supported Principles for Responsible Investment (PRI) Partners with G&E to Provide the Industry with Standardized Legal ESG Clauses

In 2005, the UN invited a group of the world’s largest institutional investors to participate in a process to develop principles to make real, tangible progress towards sustainable markets. The Principles for Responsible Investment (PRI) was established, which today is recognized internationally as the world’s leading proponent of responsible investment, with a global signatory base representing the majority of the world’s professionally managed investments. The Principles offer a menu of six possible actions to incorporate ESG objectives into investment practice. In adopting them, signatories contribute to developing a more sustainable global financial system that ultimately contributes to a more prosperous world.

The PRI further has developed a series of resources for asset owners, including guides on responsible investment and investment manager selection, appointment and monitoring. With the belief that ESG should be at the core of the asset owner-investment manager relationship, and recognizing that certain legal aspects are becoming standard features of such relationships as asset owners increasingly include ESG considerations in their IMAs and other legal documentation, PRI enlisted G&E to develop comprehensive standardized legal ESG clauses for inclusion in investment management agreements (IMAs). The suggested clauses are featured in PRI’s Investment Manager Appointment Guide.

These clauses, applicable to both listed equity and publicly-traded fixed income, are intended to empower asset owners in their selection, appointment and monitoring of their managers, and to be considered by asset owners and investment managers alike when negotiating IMAs. Industry-wide agreement on standardized terms in IMAs further facilitates the conversation for both sides and helps to manage expectations. Perhaps most importantly, the clauses are sure to help asset owners raise the bar on responsible investment. Having been at the forefront of ESG-driven litigation for years, G&E is proud and honored to have worked with PRI on an initiative of such central importance to the industry.

View the PRI Investment Manager Appointment Guide

Visit the PRI website

Background on the Grant & Eisenhofer ESG Institute

Global investor interest in sustainable and responsible investment continues to accelerate at a rapid pace. Responsible investment strategies take into consideration environmental, social and governance (ESG) factors in portfolio selection criteria and management, with the belief that better corporate ESG profiles result in fewer disasters or corporate scandals, and better long-term returns. As one example of investor enthusiasm for ESG funds, London-based ETFGI reported in December 2021 that assets invested in ESG ETFs and ETPs listed globally had reached a record $371 billion.*  Responsible Investment currently represents approximately 36% of all professionally managed assets worldwide.**  Investment policies that integrate ESG criteria tend to express investor values specific to weapons, carbon emissions, fossil fuel reserves, labor conditions, human rights, corporate governance, executive compensation, #metoo and other social and environmental issues. Corporate engagement and shareholder activism are additional approaches investors are increasingly using to influence corporate behavior in furtherance of ESG principles.

With almost a quarter century of actively protecting and promoting the rights of institutional investors and public entities, Grant & Eisenhofer has built a legacy in corporate governance with an unwavering commitment to responsible investment. The Firm has cemented this history with an initiative expressly designed to address the increasing dialogue on ESG within the institutional investor community – the Grant & Eisenhofer ESG Institute. The ESG Institute is a non-profit organization formed in 2017 with the mission of harnessing its members’ legal skills to work with investors to further a wide array of ESG goals. To this end, the Institute pursues select matters exclusively to promote legal issues related to ESG considerations, and offers thought leadership in the discipline. The Institute also aims to address, on an ongoing basis, the legal issues that decision-makers and stakeholders in the investment community grapple with in implementing responsible investment criteria.

Some of the legal issues the ESG Institute focuses on include:

  • Sustainability and Fiduciary Duty
  • Climate Change and Securities Law
  • Corporate Legal Responsibility for Activity in Developing Countries
  • Legal Challenges to Limit Compensation

The ESG Institute is led by G&E's Caitlin Moyna in the U.S. and Nadia Klein in the UK. It is also guided by an Advisory Board comprised of a diverse range of investors with global experience spanning asset managers, public pension funds and nonprofits, all of whom have a demonstrated track record of commitment to ESG causes. Prior to the pandemic, the ESG Institute met periodically, hosting regular events in both the U.S. and Europe to provide a continuous forum for engagement of like-minded participants and organizations. It will resume such events following the pandemic.

Proportion of Global SRI Assets by Region

  * Source: ETFGI Press Release – December 17, 2021
** Source: Global Sustainable Investment Review 2020 © Global Sustainable Investment Alliance 2021

ESG Related Articles

SEC Proposes Long-Awaited
Climate Change Disclosure Rules
Department of Labor Proposed Rule re ESG Investments
U.S. Senate Re-introduces the Uyghur Forced Labor Prevention Act
ESG Institute Submits Amicus Brief Supporting Corporate Liability for Child Slavery in Supply Chain
U.S. Bans Importation of Malaysian Palm Oil Products Following Petition Filed by the G&E ESG Institute
G&E Petitions to Block Palm Oil Imports Using Child and Forced Labor
ESG Initiatives Adopted by Exchanges
Hedge Funds Making Progress, But Slow to Adopt ESG
Uzbek Working to End Forced Labor in Cotton Fields
EU Agrees on New Requirements Regarding Sustainable Investments and Sustainability Risk Disclosures
Investment Professionals Increasingly Focused on ESG Factors
Aon Survey Shows 68% of Global Investors Consider Responsible Investing Important
Large Investors Ask SEC to Issue Rules on ESG Disclosure Standards
Ninth Circuit Holds No Duty to Disclose Unfair Labor Practices Under California Consumer Protection Law
D.O.L. Qualifies ERISA Fiduciaries’ Obligations Regarding ESG Considerations

Copyright © Grant & Eisenhofer P.A. All Rights Reserved.