PRI’s new long-termism project could pool signatory assets in trial mandate/fund

Project to make long-term RI mandates operational

The Principles for Responsible Investment (PRI) is considering facilitating a group of its signatories to commit capital to a trial long-term mandate as part of a project to “operationalise” long-term responsible investment mandates.

The plan could see a group of leading signatories commit, for example, US$50m to a specific long-term mandate or fund as part of a broader plan on long-term investment.

The signatories would work together to design and implement the mandate, and share any lessons with the wider PRI signatory base.

“The PRI will explore the potential for a number of leading signatories to allocate a pool of capital (for example, US$50m in global equities) to a specific long-term mandate (or fund) managed by an appropriate investment manager signatory,” the PRI says in its new Policy and Research work programme.

The aim is to develop “a robust body of evidence” on how long-term responsible investment practices might be implemented, how the challenges and barriers might be addressed, and the outcomes that might result. The idea is to build responsible, long-term investment approaches into manager appointment and reappointment processes.

The project will aim to assess the impacts of these measures on signatories and their agents, and on ESG and investment performance. It will also explore the role of benchmarks and incentive structures.

The project, which has echoes of 2003’s long-term mandate competition initiated by Universities Superannuation Scheme and the consulting firm then known as Hewitt Bacon & Woodrow, will be overseen by the PRI’s new Head of Policy Helene Winch, who joined recently from the BT Pension Scheme. Raj Thamotheram, the driving force of the competition while at USS, is now on the advisory committee of the new project (full list of members below).

It follows a consultation with signatories earlier this year which identified short-termism as an issue – whether in mandate design, at companies or at the policy level.The PRI added: “While this is as an asset owner-led project, investment managers have a critical role to play.” The project, which will involve a “structured dialogue” with fund managers, will be reported to the PRI in Person event in late 2015. The document adds: “We recognise the difficulties in establishing such a project, as it involves location of capital and requires a very close alignment of interests among the asset owner participants at the investment level.

“We have yet to gauge signatory interest in participation and recognise that it simply may not be feasible to deliver this part of the project.”

Due to the complexity of setting up of the mandate/fund, the PRI admits it is likely to take at least a year to set up, adding: “It is likely that it will then take 2-3 years for evidence of the implications to emerge.”

A feature of the long-termism project is the PRI’s intent to collaborate with a range of other initiatives. These include the Global Compact (where the PRI is supporting a briefing paper on short-termism to be presented at the World Economic Forum in Davos next month), the International Integrated Reporting Council, the International Corporate Governance Network (ICGN) and its “model mandate” initiative, the CPP/McKinsey “Focusing Capital on the Long Term” project, the G30/OECD, the Long Term Investors Club and the Global Sustainable Investment Alliance (GSIA), the alliance of eight local SIFs.

Advisory Committee:
Jane Ambachtsheer, Mercer
Héléna Charrier, Caisse des Dépôts
Stephen Davis, Harvard University
Danyelle Guyatt, Catholic Super
Johan Mellerup, ATP
Paul Murphy, ACSI, Australia
Fagmeedah Petersen Lurie, Eskom/GEPF
Raj Thamotheram
Ed Waitzer, Stikeman Elliot
Steve Waygood, Aviva Investors