PRI plans to kick out six signatories for non-compliance

Call by fund managers for PRI members to embed ESG in investment contracts.

The United Nations Principles for Responsible Investment (UNPRI) is planning to kick out around six signatories by the end of August for failing to report on whether they have taken action to implement its six environmental, social and governance principles. According to the PRI’s 2009 annual assessment report, 16 members failed to submit an annual implementation update required by all in the second year. Signatories are given a one-year grace period after joining the PRI before they must report progress. The PRI said it was in dialogue with non-responding signatories, who it said represented 7% of its obligatory respondents, and said they ultimately risked removal from the initiative. It is understood, however, that at least six will be de-listed after failing to meet the reporting criteria. James Gifford, executive director of the UNPRI told Australia’s Financial Standard that the companies were effectively “unselecting themselves” through non-compliance. It is the first time the PRI has toughened its membership criteria to exclude firms that show no signs of adopting the standards despite signing up. The number of fund managers amongst the barred firms is not known, but a de-listing could be hugely embarrassing for any investment house because of the increasing number ofinstitutional asset owners including PRI membership as part of their manager selection criteria. It is understood that full information on the firms ejected from the PRI should be available by the end of August. The PRI’s official delisting process is scheduled to run until mid-August and the PRI said it would rather not comment during that process on which signatories will be kicked out. The 2009 PRI annual assessment shows that a total of 375 signatories were invited to report this year. Of these, 61% (228) were required to participate and the response rate amongst these obligatory reporters was 93% (212). A group of fund manager signatories to the PRI recently suggested in a report backed by the United Nations Environment Programme Finance Initiative (UNEPFI) that the PRI should specify that all asset manager and asset owner signatories make ESG issues part of their legal contracts such as investment management agreements, Statements of Investment Principles or Investment Policy Statements. The managers, amongst the world’s biggest such as HSBC Asset Management, Aviva Investors and BNP Paribas Asset Management, said: “We believe that embedding ESG issues in their legal contracts will help asset owners hold asset managers to account for delivering on this important aspect of asset management.”