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PRI signals governance overhaul after pressure from disgruntled signatories

Transparency over budget, board structure and HR called for by members.

Pressure from unhappy signatories to the United Nations-backed Principles for Responsible Investment (PRI) is contributing to a major reform of the organisation’s own internal governance structure. At the PRI’s recent annual conference in Rio de Janeiro, PRI in Person, a dedicated seminar on PRI’s in-house governance led signatories to question the levels of transparency over how the PRI spends its current annual budget, which is paid for out of yearly membership fees and is estimated to be over £3m (€2.4m) per annum. The PRI’s 1081 signatories began to pay subscriptions in April, 2011. Some investors pay according to assets under management while other signatories pay based on staff numbers. The minimum is £330 and the maximum £6,600. Other major questions were raised about the ability of signatories to have a say in PRI strategy as well as the organisation’s internal human resources capability as it nears 50 staff members following a major recruitment drive in the last two years. Attendees cited a letter to PRI Chairman, Wolfgang Engshuber, from Finland´s Sustainable Investment Forum (Finsif), which includes many of the country’s major pensions and insurance retirement providers. The letter, seen by RI, expresses concerns about the PRI governance structure. A major criticism is the way the PRI representative board elected by signatories called PRIAC in turn elects a separate board PRIAB, which looks after the management of thePRI’s legal company structure called PRI Association, which was created in March 2010. The letter suggests that PRI signatories themselves might vote for PRIAB members, although its main thrust is a call for greater transparency. This, it says, includes a need for clarity on who contributes to the PRI budget, where the money is coming from and how it is spent. The letter says: “We are concerned that PRI, as it is growing, is turning into a non-transparent, non-aspirational corporation where we, the signatories, are contributing and committing financially but where we do not have any financial or governance control.” Another worry it raises is the PRI’s ramping up of work on public policy, for which the organisation is currently appointing a dedicated senior staff member. The letter said the present PRI governance structure could lead to signatories “promoting policies that we do not agree upon” promoted by representatives that do not “have the proper authority or backing to do so”. Wolfgang Engshuber, PRI Chairman, told RI that the organisation would communicate “much more clearly” what is happening internally on governance and finances to signatories. He said PRI signatories would also have the possibility to file a “signatory resolution” if they felt there were problems with the board structure, which could then be voted on by all members.
Contacted by RI, Anna Hyrske, Head of Responsible Investments and Corporate Responsibility at Ilmarinen,
the Finnish mutual pension insurance company, a member of Finsif, said PRI signatories had heard “good promises and developments on transparency” at the Rio conference: “We still have some outstanding concerns but our goal is to ensure that the PRI movesforward with the right levels of transparency and purpose that we as organisations seek in the promotion of environmental, social and governance issues in the investment community. We want to continue to be proud of the work PRI does.”