CONTRIBUTION TO GLOBAL ENVIRONMENTAL GOVERNANCE? VIEWPOINT FROM PENSION FUNDS AND UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT

Riikka Sievänen Contribution to Global Environmental Governance? Viewpoint from Pension Funds and United Nations Principles for Responsible Investmen...
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Riikka Sievänen

Contribution to Global Environmental Governance? Viewpoint from Pension Funds and United Nations Principles for Responsible Investment

Helsingin Yliopisto Taloustieteen laitos Selvityksiä nro 64 Helsinki 2011

University of Geneva & United Nations Environment Programme: ENVIRONMENTAL DIPLOMACY 2009

THESIS:

CONTRIBUTION TO GLOBAL ENVIRONMENTAL GOVERNANCE? VIEWPOINT FROM PENSION FUNDS AND UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT

Riikka Sievänen PhD student Helsinki University, Department of Economics and Management PL 28, 00014 Helsingin Yliopisto, Finland [email protected] / tel. +358 400 653 640

Table of Contents Table of Contents.......................................................................................................... 2 Abstract .......................................................................................................................... 3 1. Introduction ................................................................................................................ 4 1.1 Key vocabulary ..................................................................................................... 5 2. Objective and research question ................................................................................ 6 3. Literature review......................................................................................................... 7 3.1 Responsible Investment ....................................................................................... 7 3.1.1 Ways of doing RI ............................................................................................... 8 3.2 Public Private Partnership: United Nations Principles for Responsible Investment .................................................................................................................................... 9 3.3 Global Environmental Governance ..................................................................... 11 3.4 Conclusion.......................................................................................................... 12 3.5 Suggested literature framework .......................................................................... 13 4. Research design ...................................................................................................... 14 4.1 Qualitative interviews.......................................................................................... 14 4.2 Research framework........................................................................................... 16 5. Results ..................................................................................................................... 18 6. Conclusions and future research.............................................................................. 19 References................................................................................................................... 20

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Abstract Contribution to the global environmental governance can take place via a path involving parties like United Nations Principles for Responsible Investment, United Nations Environment Programme and institutional investors like pension funds. I find this through the following: Pension funds call for additional governance and transparency to the financial market, and better accessibility to responsible investment, suggesting the integration of these qualities to global responsible investment guidelines. United Nations Principles for Responsible Investment is a key actor in providing responsible investment guidelines and making responsible investment accessible globally. Through the most used form of responsible investment, engagement, institutional investors can contribute to their environmental investments by integrating global environmental governance viewpoints that encourage the field to develop.

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1. Introduction Contribution to global environmental governance can take place via a path involving parties like United Nations Principles for Responsible Investment, United Nations Environment Programme and institutional investors like pension funds. This path stems from practical needs in two fields: First, pension funds call for additional governance and transparency to the financial market, suggesting the integration of these qualities to global responsible investment (RI) guidelines. Better accessibility to responsible investment is also called for. I find these results from the interviews I conducted for my PhD research. Second, global environmental governance calls for better efficiency and consistency. In this thesis I want to find out the path to answer these two needs. I investigate it as follows. First, I want to find out can a public-private partnership, United Nations Principles for Responsible Investment (UN PRI), contribute to better accessibility of RI, but also to better governance and transparency that could be integrated to global responsible investment guidelines. Second, I also want to find out whether this possible contribution can impact global environmental governance, which calls for better efficiency and consistency. RI includes integrating environmental, social and corporate governance considerations into investment decision-making and investment management processes. This is how the environmental area is connected to RI. I suggest through a research framework that under certain conditions, by applying the most used form of responsible investment, engagement, institutional investors can contribute to their environmental investments by integrating global environmental governance viewpoints that encourage the field to develop. The present study serves as a thesis for Environmental Diplomacy 2009 course. It is also tied to my PhD research, representing some findings from the interviews I have conducted. However, simultaneously the present study is an independent piece of work in which I aim to tie RI to a central public-private partnership in the field of RI, and to global environmental governance. Three aspects form the foundation of the thesis. Firstly, combining non-financial criteria in investment decisions is no longer a too “green” choice, but has gained increasing interest during the recent decades among remarkable institutional investors like pension funds. In RI, investment decisions are not solely driven by financial profit, but also affected by moral considerations, legislation and tax policies (Hoffman et al. 2008, Scholtens 2007, Scholtens 2005, Renneboog et al. 2001). RI is changing role from a margin approach to the mainstream (Louche 2004, Sparkes 2004). Secondly, despite the good availability of definitions of RI, the practical “ingredients” of RI are very little investigated in the existing literature. Additional clarification and additional practical accessibility seems to be needed in the field. Thirdly, global environmental governance is characterised by inefficiencies and inconsistencies (Ivanova & Roy 2007). Entering the field through RI may open new ways to develop the field. Riikka Sievänen [email protected] tel. +358 400 653 640 / +32 487 688 344

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1.1 Key vocabulary Responsible investment (RI): Integration of environmental, social and corporate governance (ESG) considerations into investment management processes and ownership practises (The asset management working group of UNEP FI 2007). Several other definitions are aligned with this definition (UN PRI 2009, SIO 2009, Eurosif 2008, SIF 2009). Socially responsible, ethical, sustainable, green and double and triple-line investments are synonyms to RI. Socially responsible investment (SRI) is the most common term. In this study, I use the term RI to cover the different definitions. Corporate Social Responsibility (CSR): The definition of the Asset Management Working Group of United Nations Environment Programme Finance Initiative (2007): “The approach to business which takes into account economic, social, environmental and ethical impacts for a variety of reasons, including mitigating risk, decreasing costs, and improving brand image and competitiveness. CSR practises have been linked to improved financial performance.” Numerous other sources follow this definition (Heslin & Ochoa, 2008; O’Riordan & Fairbrass, 2008; Cacioppe, Forster & Fox, 2008). CSR is closely related to RI. CSR focuses on issues impacting multiple stakeholders, whereas RI is a way to evaluate a company’s response to different stakeholder groups (Hockerts & Moir 2004). Pension fund (PF): Pension fund or pension insurer means an institution which pays pensions to the retired workers. PF is set up by public or by private entity. The aim of PF is to secure the benefits of the retired workers. This is usually ensured by investing the fees paid by the members in a profitable way. (OECD Glossary of Statistical Terms 2009), Eurostat Ramon database 2009.) Public-Private partnership (PPP): An agreement between state and non-state actors. PPP can i.e. create norms, practices or implementation procedures that can be applied to the different levels of governance (Andonova 2006). United Nations Principles for Responsible Investment (UN PRI): UN PRI is an investor initiative in partnership with UNEP Finance Initiative and the UN Global Compact (UN PRI 2009). It provides voluntary Principles for Responsible Investment, for institutional investors, investment managers and professional service providers. Global environmental governance: A global activity in cooperation between states and authoritative institutions (Rosenau 2000). Mechanisms used include intergovernmental organizations, laws and treaties. Riikka Sievänen [email protected] tel. +358 400 653 640 / +32 487 688 344

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2. Objective and research question The objective of the present thesis is to investigate can a public-private partnership, UN PRI contribute to the clarification and accessibility of responsible investment, for the benefit of institutional investors, and – can this possible contribution have an impact on global environmental governance. The research questions investigated are the following: “Can UN PRI contribute, for the benefit of institutional investors, to the clarification and accessibility of RI?” “Is there a path that this possible contribution can have an impact on global environmental governance?”

The first research question refers to the field of institutional investors, who may have problems in the implementation of RI. I want to know whether UN PRI can transform the written guidelines into such form that institutional investors, like pension funds, can more easily understand how to do RI. The second research question aims to find out whether the possible contribution, to the benefit of institutional investors, can find a way that impacts global environmental governance.

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3. Literature review I examine the relevant literature areas. I aim to find out a framework that I can apply to answer the research questions.

3.1 Responsible Investment The origins of RI are in ethical considerations of what is considered moral or immoral. Bengtsson (2008) writes the roots of RI are often considered to be in the US, in the 70’s and 80’s, the reason for this phenomenon being the concern of non-economic motives. For example religious reasons have been used as a basis to evaluate what is immoral. Vandekerckhove et al. (2008) write RI has developed towards commerciality during the last three decades. Along the recognition of the impact of ethical, environmental and social performance on financial issues, RI has become a global phenomenon (Bengtsson 2008). The existing definitions of RI remain loose. The definitions provided by Eurosif (2008), UN Principles for Responsible Investment (UN PRI 2009), Social Investment Forum (SIF 2009) and Social Investment Organization (SIO 2009) all include the element of combining financial objectives with environmental, social and corporate governance (ESG) factors. Belgium has even an official definition, which lists environmental, social and ethical factors (Belgian Federal Government 2006). Each definition includes additional statements. Engagement is integrated in many of them, by stating ESG factors should be “incorporated by active ownership” or “integrated into ownership practices”. What this incorporation or integration practically means, and does an investor need to include all the three ESG-aspects to be responsible - this leaves space for discussion. In addition, the definitions seem to form a loose, abstract framework for RI. How this framework is applied to practice, is not much discussed in the existing literature. Perhaps one of the main hindrances to the popularity of RI is the contradictory findings regarding the financial performance. This is especially understandable among institutional investors, who are taking care of assets that should be invested profitably. However, at the same time overcoming this hindrance may open potential for more big players getting involved in RI. The main focus of RI research has been the financial performance. Several studies conclude RI funds and portfolios seem to perform as their peers (Kempf & Osthoff 2007, Benson et al. 2006, Derwall et al 2005, Orlitzky et al 2003, Abramson & Chung 2000), and portfolio composition is not necessarily different than in conventional portfolios (Benson et al. 2006). However, also contradictory findings exist (Fowler & Hope 2007).

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3.1.1 Ways of doing RI The definitions call for the inclusion of ESG-factors and engagement. The ways of including these into investment decision-making are typically classified into five different categories in the existing literature. Negative screening and positive screening are ways to exclude or include certain sectors, and they are the first two categories. I see screens as “filters” that frame the investment universe. Common examples of screens are environment, human resources, human rights, business behaviour, community involvement and corporate governance (Vigeo 2009). Tobacco and alcohol are also examples of screens. Professional service providers (screening companies) or asset management companies offer solutions for screening. Engagement is usually done by the institutional investors. The diversity of doing screening makes doing and defining RI neither easy, nor helps the customers to compare and choose a service provider. Mistra, The Foundation for Strategic Environmental Research (2001) analysed the products of some companies offering professional screening services. The findings encourage further research on additional transparency and comparability of the products. According to Mistra’s study, institutional investors have a role in improving the quality of the services and products. The third category, “best-in-class” approach means choosing the best performing companies from their business sectors. Sometimes best-in-class approach is considered as part of positive screening. The fourth category, “engagement” has recently gained popularity, and today it is the most used form (Vandekerckhove et al. 2008). In engagement, institutional investors use shareholder activism and open a dialogue with the concerned company. Engagement is a way of actively communicating, influencing and encouraging change in corporate behaviour. It requires attention and a possibility to follow a company’s actions from the investor’s point of view. Some institutional investors implement it in cooperation with their peers, as collective engagement. As last, “community investment” is a specific way of RI. It means investments into the development and well-being of communities, usually in disadvantaged areas. These five different categories can be combined with each other, resulting in various ways of doing RI. This flexibility provides a possibility to design a RI strategy that suits the needs of different investors. However, it also causes confusion and difficulties of implementation. In the light of the research questions, I find responsible investment and engagement are themes that I want to investigate further by including them to the framework.

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3.2 Public Private Partnership: United Nations Principles for Responsible Investment Andonova (2006) defines public-private partnerships (PPP) as agreements between state and non-state actors. They can i.e. create norms, practices or implementation procedures that can be applied to the different levels of governance (Andonova 2006). UN PRI is an investor initiative in partnership with UNEP Finance Initiative and the UN Global Compact (UN PRI 2009). The roots of this initiative are in 2005, when a group of world’s largest institutional investors were invited to engage in the process of developing the Principles for Responsible Investment (PRI), by UN’s SecretaryGeneral. In total, 20 institutional investors from 12 countries engaged in the process, and had the possibility to develop the principles to the direction they considered most appropriate, simultaneously committing to them. In addition, 70 experts representing the investment industry, intergovernmental and governmental organisations, civil society and academia engaged in the process. As a result of an intensive cooperation, the present Principles were formed. (UN PRI 2009.) The Principles are open to all institutional investors, like pension funds and insurance companies; investment managers like asset management companies; and professional service partners like screening companies. The Principles provide a flexible framework to invest responsibly. Today, the 643 institutions have signed the principles, 191 of them representing asset owners like pension funds. Signing the principles is a commitment, but there are no common rules regarding RI what each signatory should commit to. Signing the principles is aspiratory, and represents a voluntary commitment to RI. A mandatory requirement is to complete an annual Reporting and Assessment process, aiming to help the signatories to evaluate their progress in implementing the six Principles. (UN PRI 2009.) Today, there is solely a suggested voluntary fee for the signatories. However, in the annual meeting of 2009 and introduction of a mandatory annual fee, starting from 2011, was introduced. In the future, UN PRI aims to strongly support the implementation of the principles (UN PRI 2009.). Based on the interview results for my PhD research, I find this aim very important: especially the “conventional” pension funds find engaging in RI difficult or impossible. I also find my interview results are aligned with this aim of UN PRI. Based on Andonova’s definition, I understand UN PRI represents a well-functioning and successful PPP: it includes both state and non-state factors that have resulted in norms in the field of RI. To my knowledge, it is the most wide spread global RI initiative. The following table (Andonova 2009) differentiates PPPs from international organisations, from the point of view of governance.

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International organisations Public-private partnerships Hierarchy Network (typically) Rules and standard operating procedures Flexibility Continuity Flexibility Sphere of competence Pooling of competencies Legal-rational authority Pooling sources of authority Tendency for inclusive membership Selectivity, non-inclusiveness Table 1. Differentiation of international organisations and PPPs (Andonova 2009).

3.4.1 Examples from other PPPs & projects

I cite the following examples from Andonova (2009). Amazon Regional Protected Areas (ARPA) ARPA aims to protect Brazil’s Amazon forests. It has three goals: to create new strict nature reserves; to create new sustainable use reserves and to consolidate the preexisting neglected “paper-parks”. The launch of ARPA was in 2002, Brazil World Bank engaging one year later. The parties involved are Brazilian government, World Wide Fund Brazil, World Bank Brazil and Global Environmental Facility.

Small Grants Programs (SGP) of the Global Environmental Facility (GEF) SGP aims to support communities’ immediate development priorities and global environmental benefits (climate, biodiversity, desertification and international waters). Prior the launch there exist dissatisfaction regarding the institutional structure of GEF. In the end, it resulted to the launch of SGP, in 1992. The mechanism is to give small grants to community organisations and NGOs. SGP is facilitated by national UNDP offices, and the parties involved are UNF, European Commission, European Union, and bilateral donors and foundations.

Based on these two examples and UN PRI web pages, I conclude UN PRI includes clear elements of a PPP. I also find UN PRI has the potential to further influence the field of RI. Therefore I want to include the potential of UN PRI and UNEP to contribute to the framework. Both organisations are also closely linked to the research questions.

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3.3 Global Environmental Governance Finkelstein (1995) discusses widely the definition of global governance. He concludes the term governance is used when it is not really known what to call what is going on. His definition has been criticized by Dingwerth and Pattberg (2006), who defend the usage of the term by the scholars. The authors call for a more careful usage of the term because its current use has diminished preciseness and clarity. To overcome the present status, they define two concepts for the term: the analytical use and the normative use. To define the former, the authors base their argumentation on Rosenau’s earlier literature. Rosenau (2000) sees governance as a global cooperation activity that takes place between states and other institutions that exercise authority in the pursuit of goals. The definition also includes “systems of rule at all levels of human activity”, and the pursuit of goals “through the exercise of control” with transnational repercussions (Dingwerth & Pattberg 2006). To conclude, Dingwerth and Pattberg (2006) suggest analytical use for global governance, as it provides a differentiated perspective from “inter-national” relations on world politics. To proceed with the discussion, Rosenau (2007) suggests “governance will emerge from the interaction of overlapping spheres of authority; regulation will be achieved not through centralized authority but through the spread of norms, informal rules, and regimes”. He concludes this spreading does not prevent trends toward governance on a global scale. Andonova (2009) writes the mechanisms of global governance include intergovernmental organizations, laws and treaties. Ivanova and Roy (2007) find the field of global environmental governance is in the process of forming, and still needs to overcome inconsistencies and inefficiencies. The authors write the large amount of different kinds of international agencies and conventions in the field does not clarify the situation. Should it be clarified, seems to be a central question. Originally, UNEP could have taken the post of directing and coordinating the activities. However, this post remains unfulfilled. The authors suggest an increased coherence to be a next step in the field. Better arrangement of the roles and responsibilities would enable to better address the possible gaps in the field and to take action on them. As a conclusion the authors suggest an assessment of the existing global environmental governance system. I find the same themes gathered by Berruga and Maurer (2007). The member states of UN suggest the main problems and challenges in UN’s environmental work to be i.e. fragmentation, the focus on policy-making instead of implementation and the different roles of a number of bodies. With a climate governance aspect, Andonova & al. (2009) discuss transnational governance as a specific field of global governance. They address the multiplicity of actors in the field and the unclear coordination in the field. The authors suggest a typology of transnational network governance. I find the elements in the typology are somewhat similar as the arising trends in the literature regarding global environmental governance. The different functions - Information sharing, Capacity building and implementation, and Rule setting are aligned with the trends of global environmental governance. The authors further give examples of actors by functions, from public, hybrid and private points of view.

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I suggest the arising themes from the literature are clear. For building the framework, I want to include the need for additional governance in the field of global environmental governance. 3.4 Conclusion I find RI definitions leave space for modification. It seems especially the practical considerations how to implement RI are missing. UN PRI is planning for a second phase of PRI to make RI more accessible. The focus of RI research has been especially on the financial performance, resulting in contradictory findings. This should be clarified, as institutional investors are not willing to sacrifice financial profit to pursue ethical goals. I interpret overcoming this issue may encourage more institutional investors to the field of RI. Another area of research is engagement, which is the most used form of RI. I suggest engagement, and especially collective engagement could be used more in investments targeted to environmental projects. The existing literature suggests additional governance to global environmental governance is needed. Different than many other fields, environmental governance hasn’t found yet a suitable setting to ensure global environmental governance. I suggest a framework consisting of the following themes to answer the research questions: the need for RI implementation guidelines; the potential of engagement and collective engagement; the need for additional governance in the field of global environmental governance and the potential of UN PRI and UNEP to be in a key role in contributing to RI and global environmental governance.

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3.5 Suggested framework

Need for better accessibility to RI

Need for better governance in glob. env. gov.

Engagement

UN PRI, UNEP: potential to contribute

The first pillar of the framework origins from field of RI: the need for better accessibility, to be able to practice RI. The second pillar, Engagement, is a form of RI. I suggest this form has potential to contribute in the setting of this study. The third pillar is a clear theme arising from the literature of global environmental governance: the field calls for better coherence, clarity and governance. The last pillar includes UN PRI as a central contributor in the field of RI. I have also included UNEP. I find it is indirectly included in UN PRI, an initiative of UNEP Finance Initiative and UN Global Compact. In the remaining parts of the analysis, I investigate the research questions in the light of this framework.

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4. Research design The research questions stem from the needs of the field. Firstly, pension funds representing a subgroup of institutional investors, call for additional governance and transparency to the financial market, and better accessibility to responsible investment, suggesting the integration of these qualities to global responsible investment guidelines. Secondly, global environmental governance calls for better consistency and efficiency. I want to suggest a possible path to integrate these two calls, simultaneously providing a solution for them. To address the first research question – “Can UN PRI contribute, for the benefit of institutional investors, to the clarification and accessibility of RI?” - I integrate the interview results with the current information on RI on UN PRI web pages. As to the second research question - “Is there a path that this possible contribution can have an impact on global environmental governance?” - I combine with simple common sense elements from areas that are familiar to me. To motivate my choices, I build a framework consisting of four elements to get support for my views. As the first element of the framework – the implementation guidelines for RI are needed – is strongly based on the interview results, I next go through how the interviews took place. As such, the interviews do not aim to answer the research questions. However, as I take some of the interview results as one of the pillars of the framework, I think it is appropriate to explain the origin of the results more in detail. The need for better accessibility to RI is indirectly linked to the first research question: UN PRI is a potential organisation to provide support and contribution to this need. As of the second question, the link is also indirect: pension funds, representing one group of institutional investors, have the possibility to use engagement as part of their RI. 4.1 Qualitative interviews The results are based on interviews with 5 Belgian and 5 Finnish pension funds. I chose these countries based on two reasons: the countries are in very different development phases regarding the popularity of responsible investment, and I prepare my PhD research with universities in both countries involved. The pension funds were primarily chosen on the basis of the size of their portfolio. The target was not to include the five biggest ones from each country but to have a mixture of different kind of pension funds, the size of the portfolio being around € 1 billion minimum, based on the results of 2007. The Belgian pension funds had an average size of the portfolio of € 0,7 billion, were responsible of the pension cover of 60 0001 employees in average, and had 500 pensioners in average. The figures for Finland were respectively: € 6,7 billion, 200 000 and 120 000. All these averaged results were based on the annual reports of the year 2008. Seven of the pension funds are related to a corporation or to part of a public sector. Out of the corporation pension funds, the majority were in B2B business, and two in B2B and retail business. Two pension funds also cater for the pensions of the entrepreneurs. Only one of the funds is targeted at Riikka Sievänen [email protected] tel. +358 400 653 640 / +32 487 688 344

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employers from several private sectors. Two funds focus on the pensions of one specific sector. I did the interviews in two rounds: First, in spring and early summer 2009 I conducted interviews in which the approach to responsible investment was the key topic. Second, in autumn 2009 I conducted a second round of questions focusing on how the pension funds and their responsible investment have been impacted by the financial crisis. The interviews of spring and summer 2009 were semi-structured and formed along the interview according to each unique situation. The second round consisted of 5 questions: 1. Has the financial crisis impacted your pension fund’s thoughts about responsible investment? If it has, in which ways? 2. Has the financial crisis impacted your pension fund’s way of doing responsible investment? If it has, in which ways? 3. How has the financial crisis influenced your pension fund’s portfolio composition? How permanent are these possible changes? 4. How does the crisis affect the way you view the responsibilities of your fund against the sponsor(s), the employees who pay a premium, and the persons who receive a pension? 5. What would you - with hindsight – have wanted to do in another way? I’m analysing the firstly collected data by means of narrative analysis, more specifically by analysis of meaning. This method aims to answer “what is told” (Kovalainen and Eriksson 2008). This method was chosen to explore and better understand the field. Eriksson and Kovalainen (2008) argue there should be an increasing positive ground for narrative analysis in business research. The second round I analysed by simple classification. The questions were specific and the same for all the pension funds. This is why I found the narrative analysis an unsuitable method for the data. From both interview rounds, I have picked up two types of themes: the ones that suggested the need for additional governance and transparency in the financial market, and the ones that called for additional accessibility to responsible investment. I decided to integrate these results to the framework presented in the previous chapter. Based on the literature review and the suggested framework, I set up the following research framework.

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4.2 Research framework

The framework consists of three phases, starting from the lowest level. The need for clarification and better accessibility of RI comes from the field, consisting of institutional investors like pension funds. This need goes towards UN PRI, which is a key actor in developing RI globally. The three small boxes contain UNEP FI, UN Global Compact and institutional investors. They are included in the research framework due to two reasons: first, they are in the background of UN PRI. Second, at a later stage of the research framework I consider the need for a party to take responsibility of coordinating global environmental governance: I think the relation between UN PRI and UNEP is important to show.

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UN PRI is an organisation which promotes RI globally, and should therefore support institutional investors like pension funds in their call for additional clarification and accessibility. The process continues upwards to the middle level. It assumes the transfer of information in the first level is taken care of. The middle level describes Institutional investors like pension funds doing responsible investment by applying engagement as a form of investor pressure to their environmental investments. This can mean for example shareholder activism, as voting in board meetings or providing financing to environmental projects that commit to the requirements of the investors. The investment targets give feedback to institutional investors like pension funds, according to the requirements. The final phase is the one on the top. It assumes a successful engagement process in the previous phase, and specific requirements from the investors. Such requirements are ones that lead to better global environmental governance. I suggest the requirements of the investors should include cooperation between the investment target and an organisation that has a potential to contribute to global environmental governance – like UNEP. Therefore the middle and the final phase are very closely interlinked. I have included UN PRI due to its key role in the field of RI. Its contribution to the accessibility of RI is evident. It also catalyses pension funds and other institutional investors to get engaged in RI. As such, think UN PRI is not the right organisation to contribute to better environmental governance. However UNEP, being one of the background parties of UN PRI, has the potential to take the responsibility to coordinate. I think understanding the research framework, and the possible links enabling the contribution to global environmental governance have to be well explained in detail. Perhaps these links already exist, but the amount of existing literature on this topic is very limited.

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5. Results The literature review and the research questions suggest four themes that I include to the framework. These themes are 1) Need for better accessibility to RI, 2) Engagement, 3) Need for better global environmental governance and 4) The potential of UN PRI and UNEP to contribute. I find the first research question, “Can UN PRI contribute, for the benefit of institutional investors, to the clarification and accessibility of RI?” gets a positive answer. UN PRI promotes RI globally, and aims to provide a framework that assists institutional investors to take into account ESG-factors. As a next step, UN PRI will develop views that help institutional investors with practicalities regarding responsible investment. I find UN PRI has, as a PPP, all the potential to contribute to the clarification and accessibility of RI. As signing the Principles is open for all institutional investors, currently without a mandatory fee, I understand also the institutional investors can easily take the Principles as guidelines for their engagement in RI. Additionally I consider UN PRI has a special advantage of being a “serious” initiative due to having UN as a background organisation. The rules, norms and guidelines set by a UN organisation are not easily questioned. I conclude UN PRI has all the potential to be in a key role in catalysing better accessibility and clarification to RI, and in promoting RI globally. I find this conclusion gets support from the two PPP examples from environmental field that I presented. Answering the first research question is mainly based on one of the pillars of the framework – to UN PRI’s and UNEP’s potential to contribute. However, completing the considerations to this research question are of course very closely linked to the other pillars of the framework. A positive answer means, from my point of view that the analyses of the next question is possible, and the other pillars seem to be logical. Via the next question, I want to find out whether there is a path that the possible contribution can have an impact on global environmental governance. For this question, the all the pillars of the framework are in use. The research framework, supported by existing literature from RI, UN PRI and global environmental governance suggest there is a path. This path could have a positive impact and contribution to global environmental governance via the engagement of institutional investors like pension funds, to environmental investments. Engagement could encourage to better efficiency and governance that are called for in the field of global environmental governance. Especially collective engagement could contribute to the change, as a form of investor pressure. However, in order to succeed, also a potential organisation to coordinate global environmental governance is needed. In the research framework, I identify this coordination can be on the responsibility of organisations like UNEP. I arrive at thoughts of both research questions getting a positive answer. The whole path I have come up with is not perhaps characterized with mainstream elements. However, I think it represents “thinking across fields”. Perhaps it provides a structure to get the needed additional coherence and efficiency to the field of global environmental governance.

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6. Conclusions and future research

I have now addressed two needs, both stemming from practical problems. First, the need of pension funds to perceive RI more accessible. Second, the need from environmental field for additional global governance. By taking into account these two needs I investigated the research questions in the light of a four pillar framework. I found UN PRI can be in a central role in making RI more accessible. By analysing the ways of doing RI I found engagement is a possible path to encourage the invested companies and projects towards the requests of the shareholders or financing bodies. As RI contains taking into account environmental aspects, I suggest engagement, and especially collective engagement, can be a suitable form of impacting the field of environmental governance. In the research framework of the present thesis, the impact takes place by the engagement process. The requests of the investors are transferred to the environmental investments through engagement. In order to receive the contribution to global environmental governance, the requests of the investors should include a specific request: the inclusion of a link between the environmental investments and a global body like UNEP which has the potential to coordinate global environmental governance. Needless to communicate, the results and conclusions have to be interpreted with caution. Firstly, the global environmental governance is an extensive area. Despite the financial solidity of institutional investors like pension funds, their assets represent a modest amount of money. Second, the area may include sub-areas to which institutional investment is inappropriate. Third, the presented model includes assumptions that may not exist or be valid in reality. However, I think the suggested path includes cross-sectional thinking and perhaps brings novel ideas how to contribute to the global environmental governance. Based on the existing literature, there is a need to get arranged in the field of global environmental governance. The lack of efficiency and coherence reduces the credibility of the field. The future research agenda has the possibility to investigate with a detailed view the mechanisms and models for the implementation of a better global environmental governance.

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Taloustieteen laitoksen selvityksiä: Nro. 50. 51. 52. 53. 54. 55.

56. 57. 58. 59. 60. 61. 62. 63.

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ISSN 1455-8211 Helsinki 2011

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