Environmental Engineering Reference
In-Depth Information
(Hatanaka et al., 2005; Tallontire, 2007). Because of the diversity with respect to inde-
pendent actors' roles in standards-setting for industries as a whole and for speci
c
products, as well as in monitoring and enforcement, some of these standards are seen to
be stronger than others. Standards that are certi
fi
fi
able and independently veri
fi
ed by
third parties are seen to be more stringent and likely to be more e
ff
ective than those that
are not.
International investment standards
Standards for international investment by
nancial institutions have also emerged. The
Equator Principles, launched in 2003, provide a set of social and environmental bench-
marks for private
fi
nance in developing countries.
Formulated by private sector banks in consultation with non-governmental organizations
and the World Bank's private lending arm, the International Finance Corporation, the
principles are voluntary for those banks that adopt them. The idea is to ensure that
private
fi
nancial institutions to assess project
fi
nancial institutions do not fund projects in developing countries that may be
unsustainable, either socially or environmentally. In 2006, the principles were revised
and strengthened. Although they are strictly voluntary for
fi
nancial institutions, the prin-
ciples have been widely adopted, with some 50 private banks now adhering to them
(http://www.equator-principles.com/).
Principles for Responsible Investment (PRI) is a set of voluntary principles, adopted
in April 2006 on the initiative of the United Nations Environment Program
fi
nance ini-
tiative and the UN Global Compact, that institutional investors signed on to. These
principles in
fi
uence corporations indirectly as investors who sign on to them ask their
clients to report and provide information with respect to environmental, social and
governance (ESG) issues. The PRI call for investors to incorporate ESG issues into
their investment analysis and decision-making, to incorporate these issues into owner-
ship policies and practices, to seek appropriate disclosure on ESG issues by entities in
which they invest, to promote the principles more broadly in the investment industry, to
work together to enhance the e
fl
ectiveness of the principles, and to report on their
activities with respect to implementing the principles (PRI, 2007). As of July 2007, some
200 institutional investors, representing over $10 trillion in assets, had signed on to
these principles, and more than half of the signatories had asked the companies
they invested in to provide standardized reporting with respect to ESG issues (PRI
2007).
These investment initiatives are a relatively new form of standards for greening TNCs
via the pressure from investors - both shareholders and
ff
nancial institutions. Some critics
have noted, however, that these new standards, although a positive step, are still quite
limited in scope. The Equator Principles, for example, apply only to project
fi
nance, a rel-
atively small percentage of the activities of private banks. The principles are further seen
to be lacking in transparency (Missbach, 2004).
fi
Toward corporate accountability?
All of the above instruments are voluntary in nature and had strong industry representa-
tion and consultation in their development. Because of their voluntary and non-legally
binding nature, these measures have been characterized as 'soft law'. The close involve-
ment of industry players in the rules that govern them has led critics to argue that
