168. The transition to sustainable development will require large amounts of capital. Estimates from different sources (Stern, UNEP and OECD) suggest a range from 0.5 to 2.5 per cent of global gross domestic product per annum.

169. Some of this can come from the amount which Governments can save from the almost $1 trillion in subsidies which they pay every year. Some can come from redirecting a portion of the $5 trillion which they spend on the procurement of goods and services annually. Some will come from official development assistance, now estimated at $130 billion per year. But a very large part of these new resources will come from private pools of capital.

170. While enhanced corporate reporting on sustainability can provide investors with improved information on which to base investment decisions, it will not necessarily change the way they themselves behave. For this to happen, a review of investors’ fiduciary responsibilities is needed, particularly in the light of the recent financial crisis and the endemic short-term outlook of the financial sector.

171. Sustainable development requires longer-term, patient investors. Experience has shown that at least part of the current financial crisis has resulted from an overconcentration on “short-termism” and quarterly results by investors. This has revealed a unique window of opportunity for international financial reform and sustainable development to walk hand in hand.

172. Governments need to act to encourage institutional investors, such as public and private pension funds, to invest for the longer term, a critical consideration for sustainable development. At the moment, they are often prevented from doing this by national legislation relating to their “fiduciary responsibilities”.

173. We have recently seen the impact of credit rating agencies’ decisions on both sovereign and private debt. A range of institutions, led by UNEP, have played important roles in advancing sustainable development considerations as a future component of their ratings.

174. Sovereign wealth funds are also important in this regard. The total assets of such funds currently stand at nearly $3 trillion, and are expected to reach between $6 trillion and $10 trillion by 2013. Twelve new sovereign wealth funds have been established since 2005 alone. Blending commercial and public/national interests, these vehicles have considerable potential to invest for the long term and so take sustainability issues into account more fully, as well as, in some instances, having sustainability as a distinct policy objective. The Norwegian Government pension fund is an example of best practice in this area.

175. These kinds of practices could be advanced through a revision of the current “code of good practice” for sovereign wealth funds — the Santiago Principles — which would be comparable to changes in the governance of national and international public pension funds to enable them to invest responsibly.

176. Bilateral donors, international institutions, development banks and export credit agencies are exposed to fragmentation risk when their sectoral development programmes and policies do not adequately take into account the broader sustainable development perspective. Promoting economic adjustments can have strong impacts on the environment and on social issues. They must hence strive for a holistic approach to sustainable development and monitor the consequences of their policies adequately. A variety of initiatives have been launched to develop criteria for lending institutions, such as those of the “Equator Principles” (which are based on the International Finance Corporation Performance Standards on social and environmental sustainability and on the World Bank Group environmental, health and safety guidelines). These and other efforts may be useful models for wider consideration.

Recommendation 30
177. Governments should promote and incentivize the inclusion of long-term sustainable development criteria in investment and transactions conducted by companies, including financial transactions. Business groups should work with Governments and international agencies to develop a framework for sustainable development reporting, and should consider mandatory reporting by corporations with market capitalizations larger than $100 million.

Recommendation 31
178. Businesses should seek to align their business practices with universally accepted principles concerning human rights, labour, environmental sustainability and the fight against corruption, such as those set forth in the Global Compact.

Recommendation 32
179. Given the importance of large pools of private and sovereign capital to enable the transition to sustainable development, we call on the following entities to explore a range of measures to apply sustainable development criteria, including:

(a) The boards of sovereign wealth funds and of national and international public pension funds, as well as other major financial institutions, in their investment decisions;
(b) Governments or stock market regulators, to adopt or revise regulations in order to encourage their use;
(c) Stock exchanges, to facilitate their application in the analysis of companies and their reports on compliance;
(d) Governments, to develop incentives and create an enabling environment by making boards of directors attentive to them (fiduciary duty);
(e)    Governments and credit rating agencies, to integrate them into their respective risk assessments.

Recommendation 33
180. Governments, international institutions and international development banks should step up their efforts to promote sustainable development and to assess and monitor adequately the consequences of their policies in the social and environmental spheres. Multilateral and regional development banks and export credit agencies should apply sustainable development criteria, while considering country risks.