Martin Skancke: New horizons as the PRI approaches its tenth anniversary

Reflections from the Chair of the Principles for Responsible Investment

As the PRI approaches its 10-year anniversary in 2016 it is time for the organization to set its sights on new horizons. Strengthening accountability, improving incentives and showcasing leadership across the signatory base are overarching priorities going forward.
The PRI is stronger than ever. The sheer size and diversity of this month’s PRI in Person conference in London is testament to the global resonance of responsible investing today, nearly a decade after the six Principles were first endorsed by a small group of visionary organisations who could not have foreseen the phenomenal uptake that was to follow.

Today, there is widespread support for the PRI’s raison d’être: last year’s survey confirmed more than 90% of signatories support its mission to work towards a sustainable financial system. The same survey showed signatories are also broadly satisfied with the work the PRI does on a day-to-day basis, helping them implement the Principles.

However, this is not the time for the organisation to rest on its laurels. Growth is not a goal in its own right; growth is only good if it leads to greater progress in responsible investing. Like its signatories, the PRI is constantly learning and evolving, and must regularly review what more can be done to realise its ambitions. Next year’s anniversary provides an opportunity to do just that.

While there has been progress on many fronts, this year’s Report on Progress provides evidence, if any were needed, of just how far the industry still has to go. We know that more work must be done to ensure signatories are accountable to the PRI. Some signatories are concerned that too many of their peers have joined primarily for the reputational benefits. The PRI label must mean something if it is to remain credible, and there must be consequences for signatories who use it as a marketing tool, have no intention of making progress, or behave in ways that contravene their public commitment to responsible investing. This is a conversation the PRI must have with signatories as it enters its next decade.

We also know that the organisation must move away from a one-size-fits-all approach to servicing signatories, better differentiating between those at an early stage from those who are more advanced. A decade on, there is real leadership and innovation across the industry, and this is to be celebrated and showcased like never before. The PRI must work more closely with leaders to drive the industry forward, but it must also remain inclusive, welcoming those who are new to responsible investing. By many accounts, helping new and early stage signatories get started is what the PRI does best.The change we seek must be driven from the top of the investment chain if it is to be sustainable. The PRI is already developing new tools to help asset owners embed long-term performance metrics into mandates, and stronger guidance to help them hold managers to account. More must be done to ensure asset owners are incentivised appropriately, and responsible investment is overseen and championed from the very top of each organisation, which has been too rarely the case to date. Through PRI Academy, the PRI is developing dedicated material for trustees to address this deficit.

“The Board will not shy away from making difficult decisions”

Later this year, the PRI will publish a consultation paper outlining a series of options for strengthening accountability and incentivising ever deeper implementation of responsible investing practices by signatories. It will also outline options to better differentiate signatories and assess their appetite to revise the Principles themselves. It will ask searching questions that cut to the heart of the PRI’s mission and its findings may lead to far-reaching changes for the organisation. In the view of the Board however, these are necessary if the PRI is to continue to thrive over the next decade. Strengthening accountability and being inclusive are not mutually exclusive.

As I highlighted at the Signatory General Meeting, none of these changes will happen overnight. One of the lessons the PRI has learned is that in order for its decisions to have legitimacy, it must first spend time making sure they reflect the needs and desires of the wider signatory base. The PRI now has strong and effective consultation processes in place to gather signatory feedback in a structured and inclusive way. Over a period of more than 12 months, nearly 400 signatories participated in an exhaustive process last year to help develop the PRI’s 2015-18 strategic plan. Signatory feedback was used by the Executive and Board to prioritise the PRI’s work over the next 3 years and identify some longer term challenges that need to be addressed.

We will follow a similar process to consult with signatories on these important issues over the coming year, starting in December and concluding in March 2016. We will put forward concrete proposals for change at PRI’s 2016 SGM next September, aligning any signatory vote to change the PRI’s Articles or Signatory Rules with our annual Board elections in October.

The PRI’s increasingly diverse signatory roster means there are always a variety of opinions – often conflicting – about what the organisation should focus on. This is to be welcomed. The Board needs to be able to make informed decisions about the PRI’s priorities, based on feedback from as many signatories as possible. In the face of disagreement, the Board will not shy away from making difficult decisions if it believes they are in the best interests of the PRI. But it will only make those decisions after it has heard from a majority of signatories, not just those who are the most vocal.

Strong, effective outcomes take time to deliver and the PRI’s objective over the coming year will always be to promote responsible investing first and foremost.We will not delist those organisations that are underperforming simply to increase the average performance of the signatory base as a whole. Instead, we would like to use this process to strengthen our outreach to existing signatories who have not made much progress yet, to encourage them to do more.

With the collective insights and engagement of all of our signatories over the coming year, we will ensure that the PRI’s best years are yet to come.

Martin Skancke is Chair of the PRI Board.