Investors welcome PRI’s assessment framework for Advance

Investors supportive of the PRI 'not reinventing the wheel' by leveraging the existing WBA social transformation framework to track company progress for its human rights initiative.

Investors have praised the PRI’s announcement that it will use the World Benchmarking Alliance’s (WBA) Social Transformation Framework to track the performance of target companies for its human rights initiative. 

First announced in 2021 and officially launched in 2022, Advance aims to co-ordinate investor action in pushing for greater respect for human rights and social issues among businesses. 

Investor heavyweights, including Norges Bank Investment Management, Schroders and JPMorgan AM, are among the lead engagers of the initial 40 target companies, selected from the metals and mining and renewables sectors. 

The latest update came last week when the PRI officially published the assessment framework – developed by its executive with input from the signatory advisory committee and technical advisory group – that will be used to track company progress against Advance’s objectives.  

Through the framework, the PRI will also monitor investor efforts and activities and assess engagement progress with focus companies from 2024. From 2026, it will monitor developments related to Advance sector-level engagement.

Speaking to Responsible Investor, Nabylah Abo Dehman, head of Advance at the PRI, said: “We think the assessment framework provides us with a solid foundation on how we will track progress of the initiative and that it reflects our overall commitment to transparency and accountability of the initiative.”

She added that the framework was initially presented at PRI in Person in Tokyo and more recently on an Advance initiative-wide group call with Advance participants and endorsers, and “the feedback so far has been positive”.

World Benchmarking Alliance

Among the tools that will be used to track corporate performance is the WBA’s Social Transformation Framework. Launched in 2021, the framework is designed to assess the 1,000 “most influential companies in the world” across three categories: human rights, decent work and ethical conduct.  

Previously, the PRI had said that it would not be developing its own benchmark for Advance and would instead “rely on existing public benchmarks” such as “those developed by the WBA”. 

Initially, it will use the WBA’s core social indicators covering the respect of human rights, promotion of decent work and responsible lobbying for this purpose.

Further down the line, but not for this iteration of the framework, it could consider using the WBA’s indicators on bribery and corruption, fair taxes and data privacy.

The PRI said the WBA’s framework was selected, among other things, because it was developed with input from key stakeholders, including investors, and it covers the “highest number of companies of any benchmark considered across all sectors of the economy – this allows for comparability as Advance expands to more sectors in the future”. 

Moving forward, the PRI has said it will track benchmark performance for each of the focus companies annually, starting with a baseline from Q1 of 2024, and the first public report on progress in Q1 2025.  

“The performance of focus companies will be aggregated and incorporated in the annual progress report of Advance at the sector level, recognising that potential improvements are likely to be the result of multiple factors, including outside the control of the Advance initiative,” it said. “While we will not report on individual company progress in the annual report, this information will be publicly available through the WBA’s own assessments.” 

The WBA is “thrilled” the PRI is using its framework given “considerable power” that investors possess to hold companies accountable for their impact on people and planet, its social transformation lead Namit Agarwal told RI. 

Carlota Esguevillas, senior responsible investment analyst at EdenTree, welcomed the fact the framework is based off existing, internationally recognised standards, such as the WBA’s framework, “rather than seeking to reinvent the wheel”. 

Echoing this, Kevin Thomas, CEO of SHARE, told RI: “I am pleased they are using the World Benchmarking Alliance framework, rather than inventing yet another standard or assessment. The objective of Advance is to facilitate effective stewardship actions, not to recategorise or engage in standard setting around human rights, which is already quite well established in law and practice.” 

Most importantly for Thomas, the WBA’s framework identifies decent work and collective bargaining as key principles. “Workers’ rights to freedom of association and collective bargaining are the central guarantee of so many other fundamental rights,” he said.   

Tulia Machado-Helland, head of human rights and senior sustainability analyst at Storebrand Asset Management agreed that using the WBA’s work “makes sense”. More broadly, she said the timelines laid out in Advance’s framework are realistic “considering the size of the initiative and that addressing these issues in order to effect change takes time”. 

Investor efforts monitored

Alongside tracking company progress, the PRI will monitor investor efforts and activities. This will including tools and tactics used – for example, the type and number of interactions investors have with their focus companies – participation and commitment levels, and progress towards implementing a human rights due diligence process.

On whether any of these components will be made public, Abo Dehman said: “There will be some type of initiative-wide level disclosure – aggregated data – and we will be selecting case studies where as indicated, participants provide permission to share this information.”

She added that lead investors will be given the possibility on an opt-in basis to publish the objectives of the group engagement strategies.

The planned assessment of investors has raised eyebrows for some. While being overall positive about the introduction of the framework, Oshni Arachchi, head of active ownership at Danske Asset Management, told RI: “Although the terms of reference elaborates on the roles and responsibilities of the participants in the initiative, I don’t think all participants would have viewed those items as an assessment methodology in itself.”

She added that this component would have benefited from broader consultation. “Such a consultation would not only support more meaningful conclusions to be drawn about the engagement strategies adopted but also clarity on the assessment methodology.”

Abo Dehman said the PRI welcomes feedback from stakeholders and that the framework will be refined based on continuous input to ensure that it is and remains fit for purpose. However, she noted that the framework was developed with the input and feedback from the PRI’s signatory advisory committee – composed of Advance lead investors and its technical advisory group.

“The progress report will include aggregate data about investors’ efforts and activities. This data will not be linked to individual investors participating in Advance, nor to any specific company. Rather this will be used to provide an indication of overall engagement by those participating in the initiative,” she said.

“We think the assessment framework outlines the core principles that will allow us to track progress of the initiative against the objectives set and we look forward to continue working with our advisory groups and with Advance participants to flesh out how this will translate in practice.”