The Principles for Responsible Investment (PRI) should consider teaming up with corporate sustainability outfits the Global Reporting Initiative (GRI) or the International Integrated Reporting Council (IIRC) to improve its accountability, according to a new report commissioned by the PRI itself.
“Accountability is key to progressing RI,” the new report says. “In order to improve accountability while reducing the workload for both the PRI and its signatories, we recommend identifying a reporting partner.
“Teaming up with, for example, the Global Reporting Initiative (GRI) or the International Integrated Reporting Council (IIRC), could significantly improve both the effectiveness and efficiency of accountability.”
The report by Haarlem, Netherlands-based Steward Redqueen, says the PRI should investigate “which peer organisation with a robust track record on non-financial reporting” such as the GRI or IIRC is best positioned to work with the PRI.
The PRI’s Managing Director Fiona Reynolds had this response to RI: “Changing our current R&A [reporting and assessment] process is an interesting idea but is something we’d need to discuss with signatories, given that our in-house R&A methodology is very well established and familiar to our signatory base and is focused solely on investors.”
Neil Stevenson, Managing Director – Global Implementation at the IIRC, added: “We are delighted that this report recognizes the importance of evolving corporate reporting practices to achieve this. We remain committed to introducing a multi-capital approach, which will lead to a deepened understanding in the investment community of the broader value creation story of the organizations they invest in.”
The IIRC would continue to work closely with PRI, he said, adding the organisation was thankful for Reynolds’ “continued and valued participation” on the body’s high-level council.The new 40-page report – ‘From Principles to Performance: An Independent Evaluation of the PRI’s Achievements and Challenges at Ten Years’ – was based partly on interviews with 41 signatories and other stakeholders.
The consultant identified a number of limitations, such as the fact that the PRI did not formulate specific key performance indicators (KPIs) when it was established. A patchy dataset was a “handicap in the assessment of progress made over the past 10 years”.
Allied to this, and on a “more conceptual level”, the report noted there is no universally-accepted definition of ‘responsible investment’. “In some ways, RI is also a moving target, as new issues have to be addressed (for example fair tax), at the same time that many investors still struggle with the basic processes of negative screening,” Steward Redqueen said. It concludes that RI “has not yet been mainstreamed” and that implementation “still lacks depth”.
If the PRI is to help align the huge potential of the investment industry with global societal needs, the report argues it will have to “step up its efforts”.
Reynolds said: “In building our three-year strategy, which is entitled ‘moving from awareness to impact,’ we recognised the fact that responsible investment needs to go to a new level, we need to move beyond raising awareness and start to see real ESG integration.”
She said the PRI is currently undertaking a year-long consultation that will culminate in a 10-year blueprint for responsible investment. “The consultations are looking at the issues of accountability to the principles, whether the principles need to be updated, addressing systemic risks in the investment markets, how we achieve deeper ESG integration, and how we incorporate the Sustainable Development Goals into our work.
“We appreciate that we have only scratched the surface when it comes to mainstreaming responsible investment.”