The Principles for Responsible Investment will begin work on a voluntary framework to help signatories report on their responsible investment progress, according to the board’s response to a recent consultation.
Some 1,900 signatories participated in at least one of the two parts of the “PRI in a Changing World” consultation. Launched in September, the project was designed to assess the value the PRI provides to signatories, as well as exploring other issues around the future of responsible investment.
More than three-quarters of respondents said they wanted the PRI to establish “a signatory-guided design process for a framework to show progression on responsible investment”, the board said on Thursday, while 67 percent wanted to be involved in the process.
The PRI’s board said it will work on co-designing the framework, dubbed progression pathways, with signatories between July this year and February 2024.
According to Thursday’s document, the framework will aim to respond to different approaches taken by investors to responsible investment and provide sufficient options to accurately describe responsible investment practices, without overwhelming signatories with complexity or prescription.
“In practice this could mean signatories opting into elements of the framework voluntarily and choosing as many elements of the framework as are applicable to their practices,” said the report.
David Atkin, chief executive of the PRI, told Responsible Investor that the progression pathway is “one of the most exciting things” to come out of its survey.
“It’s one of the ways in which we can provide different types of support to signatories based on where they are on their own maturity curve. We need to be less homogenous in the way in which we provide guidance and tools.
“If we are able to successfully do this and get the support of signatories, that will be transformational.”
Atkin said the PRI will communicate with signatories in the coming weeks and months about opportunities to participate in the co-design process.
When RI spoke with signatories during the first phase of the consultation, several said it could be beneficial for the PRI to take a more regional approach, particularly in relation to its signatory reporting framework.
Thursday’s board response to the consultation confirmed plans to develop local responsible investment ecosystems. These efforts – which will also involve working with signatories, as well as broadening the roles of the PRI’s local relationship managers – will kick off shortly and run through 2023.
“Signatories said they value the PRI because it is global and covers all RI issues and they don’t want to lose that,” said Atkin. “However, context matters and the local environment that the signatories are working in really does determine the sort of priorities that are going to be important to them.
“What we’ll be looking to do is create more space and more resourcing to enable signatories working with us in local markets to be able to determine what their needs are, and for them to have the space and resources to respond to those needs.”
He added that the PRI will ensure it collaborates with and complements, rather than crowding out, existing local networks and groups.
Asset manager representation
As previously reported, investment managers and service providers are keen to see more non-asset owner signatories on the PRI board. Currently, seven out of 10 elected board members are from asset owners.
According to the PRI’s Articles of Association, any changes to the articles, including the PRI Board composition, must be approved by a simple majority of asset owner signatories, as well as a simple majority of all signatories voting.
Thursday’s statement revealed some asset owner pushback to the idea of changing the board structure.
Two-thirds of asset owner respondents to the second round of the consultation said they agreed with the current balance of representation. The remainder favoured a greater representation of non-asset owner signatories while maintaining the overall asset owner majority.
Atkin said the PRI will look at whether the structure needs to change.
Given that asset managers are the biggest constituent of the signatory base, “I think we can explore more opportunities – potentially either inside or outside of being on the board. We’ll look to establish specifics in due course for asset managers in the governance structure review this year.”
The board will engage with asset owner signatories, in particular to discuss benefits to them and to the PRI of widening representation of signatories, according to Thursday’s statement. There will also be alternative discussion channels with investment managers and service providers.
The survey also found that asset managers and service providers want more input to the board on the PRI’s wider strategy and priorities through regional forums and global signatory groupings, for example by investor type or asset class.
The board outlined its preliminary view on this on Thursday, saying that while it cannot consult with each signatory on every issue, “we can make better use of existing forums to develop dialogues, for example regional groups, advisory committees, working groups, PRI in Person and other events”.
The next step for the board will be to consider the construct and cadence of the PRI’s strategy-setting process, and to develop the mechanisms for signatory input that would support this.
The board response noted, however, that “ultimately it is the elected board’s responsibility to set the strategy, following signatory input”.
Finally, this week’s report highlighted a distinction between what longer-tenured signatories and more recent joiners deemed the most important PRI offering. The former look to the initiative for thought leadership, support on engagement and influencing norms, while the latter seek guidance, tools and training.
“We need to create some better forums in which there can be engagement with these long-tenured, large, well-resourced, mature, responsible investors,” said Atkin. “These investors are looking for something different from the PRI than those who have just joined. We need to make sure that we’re creating space for both.”