Analysis: ATP’s reasons for leaving the PRI read like an indictment

Amid today’s stunning Danish revolt against the Principles for Responsible Investment (PRI) one of the rebels, the DKK602bn (€80.7bn) Danish buffer fund ATP, has issued a separate explanation to RI on the event that reads like an indictment of the London-based organisation. As reported, ATP and five other Danish pension schemes representing €200bn in assets have abruptly quit the PRI, citing serious problems with the organisation’s governance. In a statement to RI, ATP, the first asset owner from Denmark to join the PRI, said a “radical change of governance” at the organisation three years ago meant:

• that the organisation’s original annual general meeting (AGM) has been abolished;
• that ATP and other affiliated investors are no longer able to influence the PRI’s purpose, accounts, budgets, membership fees, working programme etc. because of the absence of the AGM;
• that only indirect elections are held to the new management body (the PRI Association Board) and that no transparency exists as to how to achieve election to this board;
• that no real transparency exists about what is discussed and decided in PRI’s managing bodies – namely the PRI Advisory Council and the PRI Association Board;
• that ATP and the other investors are no longer able to submit proposals of any kind for a binding vote by the investors;
• and that ATP and the other affiliated investors need a minimum of 10% backing from other investors to achieve any kind of non-binding and consultative vote.

“ATP would have preferred to resolve these issues within the private PRI organisation and has spent three and a half years in dialogue with the organisation in order to re-establish satisfactory governance – but, unfortunately, without success,” the fund said. It added: “As is the case in engagements with any company in which ATPinvests, the fact applies that if you are unwilling to leave an organisation that is not willing to alter its position despite lengthy dialogue, you undermine engagement as a tool for responsible investment.” Regarding ATP’s criticism of the 10% threshold, a non-ATP source said it meant a PRI signatory had to find either 120 members or 28 asset owners to put a proposal up for a vote. “That’s ridiculous. At listed companies, any one shareholder can table a motion for an AGM. The upshot is that a concerned PRI signatory just won’t go to the trouble – and that’s unfortunate,” said the source, who spoke on the condition of anonymity. PRI managing director Fiona Reynolds is travelling to Copenhagen in mid January to meet with the organisation’s critical Danish signatories. Yet for the six pension funds, the planned trip was too little, too late. “The plane trip between London and Copenhagen only takes a half hour,” said the source: “We made it clear to the PRI in early October, or just after the PRI in Person meeting in Cape Town, that we wanted our concerns addressed urgently.” RI understands that at the gathering in Cape Town, representatives from Nordic signatories felt that their concerns about the PRI’s governance were not taken seriously. That the PRI has been completely surprised by the revolt was confirmed by the non-ATP source, who said that as late as yesterday (Thursday), not all of the six pension funds had decided to quit. Nils Erik Petersen, chief investment officer at Danish pension fund Unipension and a member of the PRI’s Advisory Council, told RI on the phone that he “regretted” the decision by the schemes to leave the organisation. Unipension, a DKK100bn(€13.4bn) scheme for architects and employees in higher education, is one of nine Danish asset owners in Denmark that remain in the PRI. Petersen, who heads the PRI’s governance committee, said: “Since I became a member of the Council in 2010, I have strongly advocated the improvement of governance structures in the organization, and I believe this is the best way – and the only way – of making changes.“ He added: “I believe that PRI should lead by example concerning good corporate governance within its own organization by means of transparency, openness, and integrity. PRI has not reached this goal yet, but we are working collaboratively and determined towards this.”