The human right to a healthy environment gives investors a strong mandate | blog post

The UN has declared that access to a clean, healthy and sustainable environment is a human right. Although this statement is not legally binding, it signals a new shift in the landscape towards mainstreaming investor research into positive sustainability impacts.

Create positive and concrete results

The right to a clean, healthy and sustainable environment is now universally recognized. States, international organizations and businesses have an indisputable role to play in solving the most pressing problems of our societies. In particular, investors need to understand and manage their real-world sustainability impacts.

The PRI welcomes this UN announcement, as it is the strongest demonstration yet in favor of broader environmental laws. Our Legal Framework for Impact (LFI) project, which identifies and interprets aspects of the law to help investors seek sustainable outcomes, calls for greater clarity on the impacts that financial investments and economic activity have on change climate change, sustainable development and human rights.1

Climate change is a societal problem

It is increasingly clear that to achieve a sustainable economy, environmental, social and governance (ESG) issues must no longer be considered in isolation. There is a strong connection between the ‘E’ and the ‘S’. In other words, climate change is a social problem. Investors must follow this evolution by integrating social dimensions into their climate strategies.

While the practice of investors integrating ESG into their investment decisions has grown exponentially, many are going even further by actively seeking positive sustainability impacts. Our LFI project has facilitated this transition by explaining the legal framework when it comes to achieving positive sustainability impacts and by encouraging policy reform to clarify fiduciary obligations.

Use the law for good

The latest UN statement is part of a growing trend of “just transition litigation”, as described by the London School of Economics (LSE), where lawyers use human rights arguments man to question how the benefits and burdens of the transition to net zero are distributed when climate laws are passed.2 The resolution also strongly challenges environmentally destructive policies and projects that expose investors to legal, financial and reputational risks.

We already know that previous UN resolutions have led to stronger environmental laws and positive real-world impacts, protecting those most vulnerable to the climate crisis. For example, following the UN’s recognition of the right to safe drinking water and sanitation in 2010, Mexico, Slovenia, Costa Rica, Fiji, Colombia and France implemented changes to make drinking water accessible to all. This was particularly timely, as the World Health Organization reported in 2010 that approximately 17% of the world’s population lacked access to safe drinking water sources and that 1.5 million children aged under five died every year from water and sanitation problems. diseases.

There is a clear direction of travel. The latest UN announcement comes a month after the United Nations Development Program recommended new measures to advance the right to a clean, healthy and sustainable environment, including by strengthening legal frameworks, ensuring inclusive and empowering local communities to actively participate in environmental protection.

How Investors Can Step Up

Investors with longer time horizons are more exposed to the risks of climate change and the impacts it will have on their ability to generate returns for beneficiaries. To maintain and improve long-term financial performance, investors have a responsibility to consider how sustainability risks affect their ability to realize investment returns.

To mitigate sustainability risks, investors may need to look for positive sustainability impacts. In doing so, they should consider the following:

  • What sustainability impact(s) are they trying to achieve?
  • What steps will they take to achieve this?
  • How will their stewardship approach help?
  • How will they measure sustainability impacts?

A set of just transition principles and strategies links climate action to the need for an inclusive economy and sustainable development.3 It anticipates the social implications of moving to a net zero economy as well as the growing physical impacts of climate change. For investors, a just transition takes the heart of responsible investing and applies it to climate change. Through this approach, investors can better understand systemic risk, reinvigorate fiduciary duty, recognize material drivers of long-term value, uncover investment opportunities, and contribute to societal goals.4

By contributing to a low-carbon economy through a human rights lens, i.e. integrating employment, decent work and community dimensions into climate action, investors can achieve positive impacts on sustainability and a just transition. In this way, investors can help realize the UN-mandated right to a clean, healthy and sustainable environment.

This blog is written by PRI staff members and guest contributors. Our aim is to contribute to the wider debate around topical issues and help showcase some of our research and other work we undertake to support our signatories. Please note that while you can expect to find articles here that broadly reflect the official views of the PRI, the blog authors write in their individual capacity and there is no ‘inside view’. The views and opinions expressed on this blog also do not constitute financial or other professional advice. If you have any questions, please contact us at [email protected]

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