WEF paper offers clarity on responsible investing
Publication authored by LBS Professor Alex Edmans provides clear definitions of a loosely understood field to help direct future discussions
A new World Economic Forum (WEF) note lead-authored by London Business School (LBS) Professor of Finance Alex Edmans is offering clarity in the field of responsible investing.
Responsible Investment: Definitions and Taxonomies is a paper from the WEF Global Future Council on Responsible Investing, of which Professor Edmans is a member. He lead-authored this paper, the first publication by the Global Future Council. It acknowledges the current ambiguity surrounding the term ‘responsible investing’ and provides clear guidance and criteria for identifying what does and does not constitute responsible investing.
The paper defines responsible investing as “the incorporation of environmental and social factors to achieve one or more of the following objectives: 1. Financial returns 2. Societal impact 3. Values alignment.”
In a summarising article on the paper, Professor Edmans writes that its purpose is “to provide clarity, concreteness and focus to discussions.”
In particular, since “RI can be pursued with different objectives and in different ways”, statements such as “RI works” or “RI does not work” are meaningless without being clear about the type of RI they refer to.
The new definition aims not to be restrictive but enabling: to highlight that RI is not one-size-fits-all but encompasses a range of different approaches and goals, and to encourage transparency about the approaches being used and the goals being pursued.
Read the paper.
