The United Nations-supported Principles for Responsible Investment (PRI) has unveiled its updated, more stringent, reporting framework for signatories, having taken on board extensive feedback from them.
The overall idea is to create a “common language” for both investors and the wider public to understand signatories’ responsible investment activities, PRI Executive Director James Gifford told Responsible Investor.
The PRI had postponed the launch of the new framework following criticism that it was too difficult to complete. A new pilot assessment framework is also being put in place.
The PRI is keen to stress that it has developed the new framework after thousands of items of feedback and hundreds of conversations. Staff were even embedded at signatories, with Gifford for example spending time with the BT Pension Scheme. The PRI says also that phrasing has been changed to “remove prescriptiveness”.
It’s sought a balance between the range of activities undertaken by signatories and a final framework that is “comparable and can be consistently applied”. The total number of indicators in the framework has been cut by around a fifth. A key change is that mandatory indicators have been split into two types: “mandatory to report” (i.e. to the PRI itself) and “mandatory to disclose” (i.e. more widely).
The reporting period will be longer too, opening in October and closing next March.Signatories will only have to complete an asset class ‘module’ if they have more than 10% of their assets in that particular asset class (pilot: 5%).
And the difference between ‘engagement for monitoring’ and ‘engagement for influence’ has been removed – meaning that the framework only focuses on the latter.
Two fixed income modules (corporate and sovereign) have been merged and will be voluntary to report against in the 2013/14 period, as will infrastructure.
All signatories will receive an “RI Transparency Report” containing all their responses to the ‘mandatory to disclose’ indicators. After checking, these will automatically be posted to the PRI website.
The idea, says the PRI’s Head of Reporting Lorenzo Saa, is to provide an “output, a tool to report to the public”.
On the assessment front, the new methodology and assessment reports will now be piloted for two years (2013/14 and 2014/15). Input from signatories will be used to refine them, and both will be finalised in 2015/16.
Gifford acknowledges that assessment has “always been the most controversial” issue, but says it will be a key learning tool as the notion of what constitutes RI best practice develops.
The PRI has also issued a guide to “help demystify” the framework. The organisation is hosting workshops on the new framework in Australia next week.
While the PRI is not strictly calling for the reports to be assured by third parties, it is something that will be encouraged. Also, the level at which the reports have been “signed off” by organisations will count towards their scores. The PRI expects some signatories to be de-listed as a result of failing to complete the process.