Asset managers’ responsible investment reporting practices are in need of development, including the improvement of client reporting on ESG, as well as expanding the coverage of stewardship policies and pursuing closer alignment with Taskforce on Climate-Related Financial Disclosures (TCFD), accoridng to new analysis recently published by the Principles for Responsible Investment (PRI).
The report, Inside PRI data: Investment manager practices, analyses data submitted by 1,858 PRI signatories during the organisation’s most recent reporting window in 2021. Investment managers now constitute more than 75% of PRI’s overall global signatory base and represented a total of just over 4,000 signatories as of early 2023.
PRI’s analysis found that 85% of investmetn managers make their overarching approach to responsible investment publicly available and disclose important information about how this approach is implemented and overseen.
Likewise, around 70% of managers report that they have a stewardship policy, either as standalone document and/or part of a broader responsible investment policy. The data shows that more than half of those policies included core elements such as asset managers’ main objectives and how they prioritised ESG factors and linked them to engagement issues.
More than half reported that their boards, or equivalent functions, oversaw climate-related risks and opportunities.
On their reasons for their engagement with pursuing responsible investment practices generally, investment managers cited long-term value creation, financial returns and performance, and issues of due diligence as key motivators.
The UN’s Sustainable Development Goals (SDGs) were also commonly cited as key informers of evolving responsible investment practices.
Toby Belsom, director of investment practices at the PRI, said: “The findings we’ve produced in this report underlines how PRI’s reporting process is vital in delivering actionable insights – both for us and for the wider sector. Through the data our signatories report, we can see that responsible investment practices are becoming increasingly widespread across our signatory base.”
He noted that asset managers’ engagement with these practices, with a view to long-term value creation and due diligence, shows that “the benefits of responsible investment are understood more widely with increasing clarity”.
Detailed responsible investment policies should be publicly disclosed
PRI’s report also highlights several areas for development among investment managers, to further drive positive change. Managers should seek to develop detailed public responsible investment policies and disclose them publicly. While 85% of PRI signatories surveyed were found to do so, 14% did not make their policies on responsible investment public at all.
Additionally, more than 70% of investors opted not to disclose how they deal with conflicts of interest in their responsible investment and two in three do not publish how they verify and report on their investments internally.
Also, close to 50% of investment managers did not report on having asset class-specific ESG guidelines. Where they did, some only applied to a small percentage of assets under management (AUM).
Investors could further develop best practice by expanding and advancing their stewardship policies, with broader coverage across AUM, asset classes and ESG issues, PRI suggested. Stewardship is well-established as an impactful tool to facilitate long-term and systemic advancement on important responsible investment issues, it added.
“The data from our reporting process highlights areas for further work in raising the standards of leading practice among investment managers,” Belsom explained.
“We know that there are still practical steps that can and should be taken to raise standards across the sector. By committing to these steps, managers can realise the benefits of a more comprehensive overarching responsible investment strategy, deliver increased transparency to their clients and contribute to collectively higher standards across the board, which in turn delivers cumulative positive progress for the industry,” he added.
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