The Principles for Responsible Investment (PRI) is “actively considering” introducing minimum requirements around the voting and engagement practices for signatories, according to its CEO, Fiona Reynolds.
Writing in RI today, Reynolds said: “This summer, we will be announcing our new minimum requirements, where we are actively considering the inclusion of engagement and/or voting requirements as part of our emphasis on stewardship.”
Reynolds' article comes in response to recent research by specialists at Dutch investment manager Robeco and the Erasmus School of Economics, which found that US-based signatories to the PRI “consistently” supported fewer ESG proposals at US companies than their non-signatory peers. The authors called on the PRI to introduce “pro-sustainable voting behaviour” as a “prerequisite” for achieving a high score in its annual assessment of signatories.
These calls are echoed by other market observers and participants.
“Many asset managers have used membership of the PRI as a way to greenwash their image without any need to change their behaviour,” said Isobel Mitchell, Senior Research and Engagement Officer at NGO ShareAction. “The current minimum standards are woefully inadequate, so increasing them is long overdue”.
In October, the PRI proposed “Require engagement and voting in listed equity” as a new standard, but Mitchell said that “this is far too vague”. “After all ‘voting’ includes voting against resolutions”, she noted. “If the PRI wants to deliver on its supposed intention ‘to usher in a new, more ambitious era of stewardship’, then it should require its signatories to vote in favour of ESG resolutions (on a comply or explain basis) and to vote against directors at ESG laggard companies.”
Reynolds said in her response that PRI is “disappointed” whenever investors fail to support “relevant, well-structured and meaningful ESG resolutions”, but added that the investor network “cannot tell investors how to vote”.
She also pointed out that the study analysed voting to 2018, meaning it did not capture the “real momentum on ESG” that has developed since then – particularly in the wake of the Covid-19 pandemic, which she said has “crystallised for many investors the importance of sustainable investing”.
However, she acknowledged “that some investors have joined the PRI, not out of any desire to incorporate sustainability into their investment practices, but to win mandates”.
Reynolds said the PRI was looking “at how we can better support voting practices” and, as well as considering minimum requirements, it will launch new guidance on the subject for signatories next month. It also plans to publish advice for those filing resolutions on how to make them “supportable by institutional investors”.