The report discusses the importance of incorporating ESG (environmental, social, and governance) issues into investment analysis and decision-making processes. The paper highlights the adverse impact of tax abuse on competition, economic growth, and sustainable development. The pandemic presents an opportunity for investors to consider how corporate taxes contribute to achieving investment returns and the Sustainable Development Goals (SDGs). The report emphasises that tax risk is financially material at the individual asset level and poses macro-financial or systemic issues that could undermine market performance and overall portfolio returns.

The paper outlines a spectrum of views on tax issues among investors and how investors can move towards practices that align with tax fairness. The PRI (Principles for Responsible Investment) intends to support investor action on tax fairness through supplemental guidance on stewardship and recommendations on integrating tax issues within their responsible investment and voting policies. It recommends that investors articulate a clear set of principles on taxation across their operations, engage with policy makers, standard setters and regulators, and collaborate with stakeholders towards sustainable tax behaviour.

The paper analyses qualitative data on media or regulatory scrutiny on tax issues and quantitative data on tax gaps, effective tax rates and unrecognised tax benefits to determine risk exposure in investment decisions. It also highlights the lack of corporate disclosure on tax issues as a key impediment for investors. Tax transparency is crucial for better risk assessment, and investors must proactively assess and monitor disclosed data over time and pursue ongoing engagement with corporates, policy makers and other stakeholders. The paper underlines the importance of strengthening tax reporting at a country level and supporting regulatory changes that make such approaches mandatory for all companies.

In conclusion, the report recommends that investors incorporate tax fairness principles into their investment analysis and decision-making processes. It draws attention to the systemic nature of tax issues and the impact they have on the real economy and global goals. The paper provides insight into the strategies investors can employ to move towards sustainable tax practices and tax fairness.