UN Secretary-General Kofi Annan (left) and John Ruggie, Special Representative of the Secretary-General (right), arrive at the Global Compact Leaders Summit held at the UN Headquarters in New York on June 24, 2004. [Photo=UN Website]

The UN’s Mandate, Finance’s Rules… The Architects of the Index Empire

In Part 1 (Who Designs the World’s Money?), we examined the structure where index providers draw the map of capital, and asset managers move money according to that map.

However, indices are not created in a vacuum. Broader norms regarding what constitutes a risk, which companies are considered "responsible," and what information should be factored into investment decisions must exist first.

One such starting point was the UN’s concept of sustainable development. In 1987, the UN World Commission on Environment and Development defined sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

The 2015 Sustainable Development Goals (SDGs) expanded this into 17 goals, including poverty, health, climate, energy, and industry. It was financial institutions that attached price tags to these values and translated them into the language of capital markets.

□ The Door Opened by UN Secretary-General Kofi Annan

In 1999, UN Secretary-General Kofi Annan proposed at the World Economic Forum in Davos that business leaders create a "Global Compact" based on shared values and principles between the UN and the private sector. The UN Global Compact, launched the following year, was a voluntary initiative to propagate ten principles regarding human rights, labor, the environment, and anti-corruption into corporate activities.

Here, corporations moved beyond being mere subjects of international norms; they became partners with the UN, creating norms and implementation methods to spread them across the global business network. Kofi Annan elevated corporations from recipients of international norms to co-architects.

A decisive moment occurred in 2004. Kofi Annan requested the CEOs of 55 of the world's major financial institutions to develop guidelines for integrating Environmental, Social, and Governance (ESG) factors into asset management and securities analysis. The result was the “Who Cares Wins” report.

Twenty financial institutions from nine countries participated in its development, with combined assets under management exceeding $6 trillion at the time. The cover featured 23 endorsing institutions, including Goldman Sachs, Morgan Stanley, Deutsche Bank, HSBC, UBS, BNP Paribas, the International Finance Corporation (IFC), and the World Bank Group.

The starting point was not charity. It was an investment logic: companies that manage ESG well can reduce risks, anticipate regulatory changes, and enhance shareholder value.

This was the moment when the environment, human rights, labor, and governance shifted from being "good deeds" to financial information that impacts corporate value.

The modern ESG investment system was not a set of rules imposed by the UN upon financial firms. It was a set of rules that the UN specifically asked financial firms to create for themselves.

□ Government for Enforcement, Markets for Detailed Rules

“Who Cares Wins” called on governments and regulators to create a minimal legal framework for ESG disclosure and accountability. At the same time, it suggested that detailed standards should be designed through market-led voluntary initiatives.

Stock exchanges were urged to include ESG in listed company disclosures, while accounting standard bodies, credit rating agencies, and index providers were pressed to create consistent benchmarks. Pension funds were advised to reflect ESG in the selection of asset managers and investment mandates, and asset managers were encouraged to integrate ESG into investment analysis and the exercise of voting rights.

The structure was clear: the government provides the minimum level of enforcement, while the financial market creates the detailed rules to be used within that framework.

The UN Principles for Responsible Investment (PRI), launched in 2006, translated this into an operational framework for institutional investors. With the creation of six principles—integrating ESG into investment analysis, decision-making, shareholder activism, and corporate disclosure requirements—ESG became a code of conduct for pension funds and asset managers.

The "Index Empire" we examined in Part 1 is also connected here. ESG principles become corporate disclosures, rating agencies turn them into scores, and index providers use them as criteria for inclusion and weighting. Asset managers follow those indices to move money. The UN’s language of values has been converted into the financial sector’s language of analysis, and finally into the rules of capital allocation.

□ The UN’s Name, Private Money

The UN Global Compact does not receive regular UN budget funding. Governments contribute to trust funds, and corporations pay annual fees and donations to the Foundation for the Global Compact, a non-profit corporation in New York.

While legally separate from the UN, the foundation supports the UN Global Compact’s fundraising, staffing, events, research, and programs through a Memorandum of Understanding. According to the 2023 audited financial statements, annual contributions from corporate participants and signatory organizations totaled approximately $28.86 million, with an additional $19.81 million in donations and grants. Of this, about $13.72 million came with donor-specified purposes.

If one can designate which projects and agendas the money is spent on, that money gains closer proximity to the organization's priorities. The UN provides its name, international legitimacy, and diplomatic convening power, while corporations and financial institutions provide capital, data, experts, and operational capacity. The Global Compact is a public-private hybrid that combines these two forces to transform private standards into the language of international norms.

□ The Beneficiaries of the Largest Market

The sector that gained the largest new market in this structure was the financial industry. Asset managers created ESG funds and exchange-traded funds (ETFs), while banks expanded green bonds, sustainable loans, and transition finance. Rating, data, and index companies repeatedly sold ESG scores and ratings. The accounting and consulting firms found a new market for disclosure, verification, and strategic consulting.

This does not mean that ESG is entirely a fiction. Climate risks, labor rights, corruption, and corporate governance do affect corporate value and society. The problem is who defines the risks, sets the measurement criteria, and decides the price and direction of capital based on those scores.

The fact that the financial institutions subject to these rules wrote the drafts themselves and possess the ability to commercialize those rules inevitably raises questions about conflicts of interest.

This structure also explains why the Donald Trump administration in the US attacks ESG and multilateralism centered on international organizations.

The Trump administration has defined ESG as capital allocation that prioritizes political agendas over investment returns. In 2025, it raised concerns about the influence of proxy advisory firms that prioritize ESG and Diversity, Equity, and Inclusion (DEI) agendas, ordering a review of related regulations and shareholder proposal rules.

The conflict between Trump and the UN is not merely a debate over international cooperation. It is a clash between the global common rules created by the UN-finance-index network and the sovereign politics that insist that elected national powers should directly determine industrial, energy, and investment policies.

The "Index Empire" is not a massive secret society. It is an open network of power where the authority of the UN, the coercive power of governments, and the money and expertise of financial institutions rely on one another.

Sustainable development provided the justification, ESG attached the price tags, and the PRI created the operational rules that move capital.

In Part 1, we saw the map through which capital moves. In Part 2, we tracked the rule-designers who drew that map. The theme of Part 3 will be that "even that map is not eternal."

Two powers are currently colliding in the world. One is the transnational power combining the UN’s universal mandate with the operational reach of financial capital. The other is the political power that prioritizes elections, borders, and national sovereignty.

The final victor is not yet decided. However, one fact is clear.

The person who rules the world’s money is not the one who has the most money, but the one who sets the rules that money must follow. Trump’s rebellion is exactly the fight over who gets to set those rules.

※ This article was published in “Weekly Korea-US-Japan Report No. 19.”