Although the awareness of responsible investment is growing, implementing the Principles for Responsible Investment (PRI) is still proving a challenge 10 years on, according to an independent report assessing the impact of the PRI which was launched in 2006 as a partnership between the UN Global Compact and UN Environment Programme Finance Initiative (UNEP FI).
The report, however, says that the PRI is recognised as the global voice on responsible investing for the investment industry and in the past 10 years the numbers of signatories to the PRI have grown from 100 to over 1500 with the assets under management this represents rising from $7 trillion to over $60 trillion. The report’s authors suggest that while taking environmental, social and governance (ESG) issues into account in investment decisions is still not a mainstream activity 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.
The authors suggest though that the time has come to move the principles on from purely aspirational as was true 10 years ago to a point where the signatories have a clear aim to achieving the PRI’s goals. However, they accept that for RI to become mainstream will involve a system change — “a paradigm shift that, amongst other things, will require a corresponding culture change within the world of institutional investors.” The approach taken to achieve integration of RI is through four phases – the first based around learning, the second based on formulating the business case, the third has a focus on applying RI in certain areas of the portfolio while the fourth phase is implementing RI across the portfolio.
In a survey of PRI members it was found that 85% of respondents state it is their ambition to reach phase 4 ‘full integration across their portfolio’. The research shows that progress is being made in achieving this with 64% of surveyed signatories having integrated 50- 100% of their portfolio. Overall, more than 80% of surveyed signatories indicate that they now either partially or fully integrate RI into their operations, as against a minority of signatories 10 years ago.
According to the report the progress made can be attributed in part to the PRI’s efforts, with 70% of respondents indicating that the PRI had a moderate-to-strong impact on mainstreaming RI within their institution.
The report concludes that in the past decade the PRI has succeeded in uniting a large proportion of the investment industry around the objective to incorporate ESG issues into investment analysis and decision-making processes; it has become the leading investors’ platform for learning, engagement and sharing of best practices in RI; it is recognised as the global voice on RI for the investment industry and a thought leader in ESG integration and it represents the investor perspective in global dialogues on sustainability.
However, to succeed in the future the report recommends that more clarity and consensus should be developed about the PRI’s purpose and vision – in particular if an institutional investor chooses to become a signatory the PRI should make it clearer that progressing RI integration is not optional; the PRI should be more critical about prioritising its own activities, to make them as effective as possible in triggering change and there should be an improvement in the accountability process.
A series of events will be taking place globally between May and July to discuss the PRI’s plans for the next 1o years. The recommendations that result from these workshops will be presented at PRI in Person event taking place 6-8th September in Singapore.
Last Updated: 22 April 2016