PRI in push to help investors address corporate political activity

It comes as Church of England Pensions Board confirms plans to publish standards on corporate lobbying and political influence next month

The Principles for Responsible Investment (PRI) has unveiled plans to in the coming year develop further stewardship guidance for investors on “responsible political engagement”.  

In a report published yesterday, the PRI said it will aim to provide specific guidance on corporate political engagement – such as lobbying and political spending – as it relates to climate change and human rights. It will also broaden the engagement it has coordinated on climate lobbying over the years to other ESG issues. 

Launched alongside research by the OECD mapping out political engagement regulations across selected jurisdictions, the report explained that currently “the level of investor activity on corporate political engagement has been limited.” Where there is action, it is usually centered on climate lobbying and/or political spending in the US

Political engagement without proper safeguards could impede global sustainability objectives and contribute to system-level risks’

“The reticence could be due to a fear of being embroiled in political debates,” the report says. “It could also be due to beliefs that investors are unlikely to achieve the intended impact or do not have the necessary data, expertise or capacity to engage on such complex matters.”  

However, it stressed that investors share responsibility for their investees’ political engagement approach, particularly where it is linked to important societal and environmental issues. “Political engagement without proper safeguards could impede global sustainability objectives and contribute to system-level risks,” the report adds.  

Transparency is often highlighted as an issue around corporate lobbying and spending, with for example the recent World Benchmarking Alliance’s (WBA) Social Transformation Baseline Assessment  finding that only 20% of the assessed 1,000 companies publish a “high-level approach to lobbying and only 8% of companies disclose how much they spend on lobbying and influencing legislation.” 

“There needs to be a significant shift in corporate transparency on lobbying and political engagement to ensure corporate influence isn't undermining the SDGs and Paris Agreement,” the WBA assessment concluded. 

The PRI has been working in the climate lobbying space since 2015; in particular, it is currently supporting a project on responsible corporate climate lobbying, led by the Church of England Pensions Board, AP7 and BNP Paribas.  

“The project seeks to develop up-to-date standards on corporate lobbying and political influence, engage with companies and build a benchmark to evaluate portfolio companies on Paris aligned climate lobbying practices,” according to the PRI report. 

In a webinar yesterday, Clare Richards, Senior Engagement Manager, Church of England Pensions Board, said the corporate lobbying standards will be launched next month. 

Meanwhile, the PRI report makes a range of recommendations to investors for how to tackle it issue. They include engaging with policy makers to strengthen mandatory disclosures, undertake stewardship activities to clarify expectations and support efforts to improve public disclosure to address data gaps.  

Alongside the work announced yesterday, the PRI will be including lobbying in its collaborative human rights stewardship initiative

When discussing the metrics which will be used when engaging companies and tracking their progress, Paul Chandler, the PRI’s Director of Stewardship, previously explained to RI they will be anchored in three pillars, one of which is “looking at companies’ political influence and policy engagement, ensuring they are aligning activities such as lobbying with their commitment to human rights”.  

There's also potential the subject will make its way into the biodiversity space. 

The WBA’s draft methodology for its upcoming Nature and Biodiversity Benchmark, included a proposal to assess whether a company “advocates for nature-positive policies and regulations and discloses any misalignment with its lobbying activities as well as the measures it takes to address misalignment.”