Investor collaboration on the rise – UN PRI

Investors and fund managers running more than $2 trillion (€1.5 trillion) in assets are clubbing together to lobby companies on environment, social and governance (ESG) issues using the UN Principles for Responsible Investment Clearinghouse – a private website where investors can pool information and resources. According to a survey by the UN PRI, 26% of asset owners and asset manager signatories to the PRI have used the Clearinghouse to club together on corporate engagement strategies since it launched last year. It says the number of users is expected to rise, with 31% of institutional investors saying they would engage with companies through the Clearinghouse in 2007. Its growing success suggests joint shareholder activism is becoming increasingly common. Investors have already used the Clearinghouse to lobby Walmart, the US supermarket giant, on reported cases of management non-compliance with Internal Labour Organisation conventions and standards on worker’s rights as well as its record on legal and regulatory controls. Joint lobbying has also taken place with automobile manufacturers over alleged slave labour in the Brazilian supply chain to produce pig iron, a key component in car production.
Collaboration has also taken place on issues of executive pay, shareholder rights and director nominations.The Clearinghouse allows investors to post proposed resolutions prior to company annual and emergency general meetings and gather support from other shareholders. It was the first such shareholder engagement initiative in the world.
The UN PRI says that despite numerous effective examples of engagement there are still few investors with the financial muscle to affect corporate performance on ESG issues.
In its support, it cites what it calls: “The tragedy of the commons”, also know as the “free rider” issue where the costs of monitoring corporate performance and engaging with companies are borne by those engaging while any eventual benefits are shared out between all shareholders: “When engagement is carried out in a professional and systematic way, these costs can be significant,” the PRI says.
It says the Clearinghouse has yet to be used by the majority of its 195 signatories, but that most have indicated they would do so. The combined assets of the 195 signatories to the PRI are worth about $9 trillion.
A dedicated staff member is being recruited by the UN PRI to co-ordinate the activities of the Clearinghouse including engagement meetings with companies, briefings and conference calls.