THE CAMBRIDGE PRINCIPLES

Including the stewardship philosophy articulated in the Cambridge Principles in an institution’s governance documents can provide a governing body with confidence that it is acting in the best interests of beneficiaries and provide clear guidance to staff and outside managers.

GUARDRAILS

Guardrails allow investors to establish limits on corporate behaviors that excessively externalize social and environmental costs. While guardrails do not replace engagement on specific issues, they can raise minimum performance expectations, providing investors and companies with confidence that financial success at a company must be built on efficiency and innovation, not externalization of social and environmental costs. To accomplish this purpose, guardrails should be universalizable, meaningful and measurable. Click here for more on the structure and cadence of a guardrail.

System stewardship involves engagement with companies that do not conform to the guardrails—not divestment, except in special circumstances. The primary implementation mechanism for companies that do not conform to a guardrail is engagement and voting against one or more directors. The ideas embodied in the Cambridge Principles suggest that investors could decline to provide new capital to such companies and engage in policy advocacy to support legal regimes that impose rules similar to the guardrails.

TSC and two Cambridge University institutions, the Center for the Study of Existential Risk and the Intellectual Forum at Jesus College, have worked with multiple experts to pilot a set of Guardrails. These are exemplary, illustrating the type of universalizable rule that could be promoted by shareholders. For example, one guardrail would prohibit the opening of new oil and gas fields (because a Paris-aligned carbon budget is completely covered by current fields). The example is not meant to suggest that shareholders should also not be advocating for the wind-down of some current production, only that the expert panel did not develop a sufficiently universalizable rule for such wind-downs.

We hope that the publication of these examples will accelerate investors to build consensus around specific limitations on corporate practices that investors can apply so that business becomes increasingly regenerative and decreasingly extractive.

For assistance using these resources, please contact us. TSC is a philanthropically funded organization and thereby covers the costs for this assistance. This information on this website does not constitute legal advice.