GLOBAL INSTITUTIONAL INVESTORS ALLIANCE Framework for Sustainable Investment Practices Version 3.0 | Effective January 2026 Developed by the ESG Integration Working Group
This Framework articulates comprehensive guidelines for institutional investors committed to integrating environmental, social, and governance (ESG) considerations into investment decision-making processes. Developed through collaborative efforts involving pension funds, sovereign wealth funds, endowments, and insurance companies collectively managing assets exceeding $18 trillion, these guidelines reflect emerging consensus regarding the materiality of sustainability factors to long-term financial performance and systemic risk management.
Principle 1: Climate Risk Assessment and Portfolio Decarbonization. Institutional investors must conduct rigorous assessments of climate-related financial risks across their portfolios, employing scenario analysis methodologies consistent with frameworks established by the Task Force on Climate-related Financial Disclosures (TCFD). Such analyses should evaluate portfolio resilience under multiple climate scenarios, including pathways aligned with limiting global temperature increases to 1.5°C, 2°C, and projections reflecting current policy trajectories. Based on these assessments, investors should establish measurable portfolio decarbonization targets, with interim milestones for 2030 and 2040, and publicly disclose progress annually.
Principle 2: Active Ownership and Corporate Engagement. Recognizing that divestment alone is insufficient to drive systemic change, investors should pursue active ownership strategies that leverage their influence as shareholders to encourage portfolio companies to adopt more sustainable business practices. This entails systematic engagement with corporate management and boards regarding material ESG issues, filing shareholder resolutions when constructive dialogue proves ineffective, and exercising voting rights in manners consistent with long-term value creation and sustainability objectives. Investors should publicly disclose their engagement priorities, voting policies, and outcomes of significant engagements.
Principle 3: Biodiversity and Natural Capital Preservation. The accelerating degradation of ecosystems and loss of biodiversity present material financial risks that have historically received insufficient attention in investment analysis. Investors must evaluate portfolio exposure to nature-related risks, including dependencies on ecosystem services and impacts on natural capital. Priority sectors for assessment include agriculture, forestry, fisheries, extractive industries, and infrastructure development. Investors should support the development of standardized metrics for biodiversity impact measurement and advocate for enhanced corporate disclosure regarding nature-related risks and dependencies.
Principle 4: Just Transition and Social Equity. The transition to a low-carbon economy must be conducted in manners that address distributional impacts and avoid exacerbating social inequities. Investors should assess how portfolio companies are managing workforce transitions, supporting affected communities, and ensuring that the benefits of sustainable transformation are equitably distributed. This includes evaluating corporate commitments to fair labor practices, worker retraining programs, community investment in regions experiencing economic dislocation, and diversity, equity, and inclusion initiatives throughout organizational hierarchies.
Implementation of these principles requires substantial enhancements to investment infrastructure, including expanded ESG data capabilities, specialized analytical expertise, and modified governance structures that institutionalize sustainability considerations within investment committees. The Alliance commits to providing technical assistance, sharing best practices, and facilitating collaborative initiatives to support member organizations in operationalizing these guidelines effectively.