From Principles to Performance
The PRI is widely applauded for putting responsible investment (RI) on the agenda of investors and policy makers. In just ten years since its establishment it has become the leading global investors’ platform for learning, engagement and the sharing of best practices on RI. Launched in 2006 as a partnership between the UN Global Compact and UN Environment Programme Finance Initiative (UNEP FI), the PRI represents the investor’s voice in dialogues with stakeholders in the ‘enabling environment’ to advocate policy development and other supportive practices. The PRI is also appreciated for being a ‘big tent’ organisation that helps new signatories embrace the basics of RI on the one hand and facilitates a ‘race to the top’ amongst signatories on the other.
But while there is now significant awareness about RI, implementation still lacks depth. Even the PRI signatories seem to be struggling to put the Principles into practice. It may well be that much more advanced RI practices within the global capital markets could not have been realised within a decade. Nevertheless, it is clear that the PRI must now step up its efforts if it is to continue to have impact in the future.
For the PRI to progress RI practices and support ‘real-world change’, this report has three recommendations:
1. Signatories’ views vary as to the PRI’s purpose and ambitions. Some see it as a platform for learning and engagement, others want it to be a (more activist) voice for real-world change with concrete outcomes. As this seems increasingly to hamper its effectiveness, the PRI should make more clear to signatories that progressing RI integration is not optional;
2. Managing a ‘big tent’ organisation is challenging. The PRI needs to focus its activities to optimise its added value and avoid losing traction. We recommend the PRI focus its efforts on changing market practices in Europe and the USA, given their dominant market position. In addition, the PRI should select a number of new markets, and for each one develop a clear entry strategy plan. The Clearinghouse can be better utilised to address specific sustainability challenges;
3. Accountability is key to progressing RI. In order to improve accountability while reducing the workload for both the PRI and its signatories, we recommend identifying a reporting partner. Teaming up with, for example, the Global Reporting Initiative (GRI) or the International Integrated Reporting Council (IIRC), could significantly improve both the effectiveness and efficiency of accountability.
The PRI is well positioned to have a positive impact on the investment industry and facilitate real-world change. By pursuing a focused agenda, setting clear goals and KPIs, and managing these consistently the PRI can continue to be a driver for sustainable development for another ten years and beyond. It should be mentioned that the PRI is aware of many of the points and issues mentioned here, and that most are addressed in the PRI strategy 2015-2018 ‘From Awareness to Impact’ and broader stakeholder consultations. Findings of the consultations will feed into a responsible investment blue print which will define the PRI’s strategic objectives and direction for the next ten years. We believe strongly that the investment industry needs the PRI and the PRI can in turn guide the investment industry to greater real-world impact.
Investment based on environmental, social and governance (ESG) factors has long been viewed as a niche strategy. Though RI is not yet mainstream, it is clear an increasing number of asset owners and investment managers have to a degree embraced ESG. The PRI has created an international network of investors, and thereby established a platform where investors can work together to put the six Principles for Responsible Investment into practice. Just ten years after its launch, the PRI is recognised as the global voice on responsible investing for the investment industry. Independent assessment
Accountability is central to the PRI’s activities and the organisation has communicated extensively on the progress it is making. In the ‘Report on Progress 2015’, Fiona Reynolds, the PRI’s managing director, applauds the rapid evolvement of RI and the commitment to the Principles of many organisations. However, she also points out that the implementation still lacks depth and many signatories continue to see RI as being distinct from their mainstream investment processes. She therefore calls on investors to now build on the progress many institutions have already made towards meaningful change in their policies, strategies and practice.
To download the full report, please click here.