PRI sets aside £450,000 contingency against lower signatory fee income

A potential fall in markets/AUM could hit fee income, signatory body says

The Principles for Responsible Investment (PRI) has set aside a £450,000 (€505,576) contingency to cover potentially lower fee income stemming from lower markets.

The PRI has grown to 1,586 signatories – with 19 new ones signing so far in October alone. Recent newcomers include Stichting Pensioenfonds Blue Sky Group, the €19bn Dutch pension manager that grew out of the KLM pension funds, US asset manager Gamco Investors and the Jeremy Coller Foundation. Total signatory assets under management exceeds $60trn.

Its surplus has grown to just over £1m from £297,622 in the prior year – with income growing to £8.1m from £5.4m, according to its latest accounts.

But it says it has considered a “number of risks” to its income.

“Chief among these,” it says “was a potential fall in markets that would adversely impact fee income; to date PRI has benefited from rising markets and assets under management.”

So, following the year-end it set aside £450,000 “as a contingency reserve from the 2015/16 surplus”. It said the sum represents approximately 5% of 2016/17 planned income – which suggests it is budgeting for an income of £9m.
A PRI spokesperson said a potential market decline could adversely affect fee income by reducing theamount of assets under management on which signatory fees are levied, adding that the reserve “forms part of our cash deposits”.

The PRI has said that it will start to de-list signatories that don’t show progress in implementing its six principles in what Managing Director Fiona Reynolds said was a move to get rid of signatories who are just “ticking a box”.

The PRI is run by the PRI Association, a UK-based not-for-profit company that was formed in 2010.

Meanwhile, the PRI and the Environmental Defense Fund (EDF), the US environmental advocacy group, have released a new investor guide to support constructive dialogue with oil and gas companies around the world on methane emissions.

An investor’s guide to methane offers practical guidance on how to not only manage risks associated with methane emissions through company engagement, but identify opportunities as well.

It provides a framework for investors designed to help them identify concrete next steps companies can take to improvement management, benchmark company performance and engage on methane risks.

“Methane emissions pose significant financial, reputational and regulatory risks for oil and gas industry investors,” they say, adding: “The oil and gas sector is the largest industry sources of methane today.”