UN PRI shakes up signatories’ reporting to make survey responses mandatory

Greater focus on responsible investment outcomes amid transparency push

Investor signatories to the UN-backed Principles for Responsible Investment (PRI) will have to make public disclosure of their responses to the initiative’s annual Reporting and Assessment Survey from 2013, under new proposals.

The PRI is redesigning its Reporting and Assessment framework to reflect new asset classes and more diverse signatories amid a push for greater transparency.

There will also be greater emphasis on investors’ reporting on the outcomes of responsible investment activity, which the PRI says “remains in its infancy”. It points out that currently very few investment managers have sought to explicitly assess outcomes, and fewer have reported publicly on their performance.

The existing survey was launched in 2006 and allows signatories to report on their responsible investment activities and progress towards fulfilling their commitments under the PRI Principles. It will be discontinued in its present form with the new scheme to be launched in May 2012 on a voluntary basis to allow signatories to try it out before it comes into force a year later.

Some 538 of the around 900 signatories currently report on their activities – with 44% of them opting to publicly disclosure their responses.

“Our goal is to create the world’s most robust and comprehensive responsible investment reporting and assessment process for investors,” said PRI Executive Director James Gifford.

He said there were certainly concerns expressed by signatories but added: “From our discussions withinvestors, we believe there is a real need for a reliable process to assess responsible investment capability, and like all other areas of business, there needs to be clear indicators of progress and success.

“While reporting and assessment may be resource intensive, most signatories recognise the importance of it, both to their own internal management of these issues, and the integrity of the PRI”.

It’s felt that the current reporting scheme does not pay enough attention to the differences between asset classes and does not adequately differentiate between ‘direct’ and ‘indirect’ investment.

“Asset owners will use the information to help choose their investment managers,” says a PRI scoping document on the changes, adding that beneficiaries can use it to assess the degree of responsible investment implementation of their pension schemes.

Guidance for six asset classes – listed equities, fixed income, private equity, infrastructure, real estate and microfinance (and indirect investments) will be developed first. It’s intended that similar supplements for other asset classes such as hedge funds, themed investments, forestry and commodities will be developed over time.

An option for the reporting could be a ‘comply or explain’ approach. Another question raised in the review is whether to introduce an assurance system that could be licensed by the PRI.

The PRI will work with consultants Acona Partners to develop drafts of the new framework and consult on the issue during September and October. Announcement