The Principles for Responsible Investment (PRI), today announced that it will start to de-list any of its 1,500 signatories who fail to demonstrate sufficient progress on implementing its six principles.
The PRI often faces the charge that some of its signatories merely “tick the box” of signing up and don’t forward the cause of responsible investment. That’s about to change under a shift of stance announced today.
“We really want to get this message across: we are not trying to have hurdles for entry to the PRI,” said PRI Managing Director Fiona Reynolds, speaking to RI at the organisation’s annual PRI in Person event in Singapore. “We want you to be able to come and get started with us. If you can’t come to us to get started in responsible investment, where do you go?”
Firms liable for de-listing aren’t likely to be small organisations taking time to make progress, she said.
“The people that we want to remove are those that – and we know that they exist – have no intent of ever doing anything about responsible investment; it’s a ticked box for marketing purposes.
“Of course our main aim is to get them moving but if they don’t then it’s up to them: if they don’t want to make progress, then… they’ve got to go.”
“Ten years on, since the principles were put in place it’s now time to increase accountability, because it’s pretty difficult to say there aren’t the tools, the knowledge, the service providers, the frameworks to help you. All these things are there and there’s no reason that you can’t do this, whereas five years ago, seven years ago you couldn’t do this because people were still trying to work out how to do it all.”
One of the key elements of the new stance is an increased focus on positive investment ‘outcomes’ and not just responsible investment ‘process’.
Reynolds said: “Do you want responsible investment to be all about, again, ticking boxes? Obviously processes are important, because you have to have them in place to get responsible investment done. But 10 years later we have to see what is that translating into?
“So I would like to see, for example, how much in a year got moved into green finance, how much money went into green bonds from our signatory base?”She would like to be able to say how much PRI signatories had shifted diversity, for example, to answer the question: “What’s the big change that signatories are making from the work that they are doing?”
She added: “I think we would have a much stronger argument from a public policy point of view if we can show these are the outcomes we are having for economies, communities, new innovation etc.”
“That’s the kind of impact outcome that we want to create.”
The reporting against these issues would probably start of in a narrative way. From that the PRI would be able to develop indicators to “make it more sophisticated over time”.
But she definitely didn’t want to replicate existing frameworks such as, for example the Global Impact Investment Network (GIIN’s) methodology. “If we can take practices from other organisations and put them into our reporting or if they’re relevant to what we want to do, we’ll definitely work with others.
Another pillar of this new-look PRI is a focus on the United Nations’ Sustainable Development Goals (SDGs) – and making them an investible proposition. Reynolds noted how some leading Scandinavian funds are looking at this. And the PRI would want to work with them.
She went on: “If you look at the Sustainable Development Goals – most of them are ESG issues, they’re just using different words.” The PRI will focus on the SDGs where there is a clear link with investment issues, working with the Global Compact, given that companies are looking at the SDGs.
More broadly, the PRI has worked closely with the G20 this year with current chair China very focused on these issues, she said. Indeed, Ma Jun, the Chief Economist at the People’s Bank of China, is due to give a keynote on the China’s efforts to establish a green financial system at the event.
Asked about the opportunities presented by high-level developments such as Bank of England Governor Mark Carney’s pushing the environmental reporting agenda along with the SDGs and the momentum created by COP21, Reynolds said: “I think it’s that perfect storm: all of those issues coming together – and all in our favour. We’ve got to strike and get things moving now and not miss the opportunity.”