The Principles for Responsible Investment (PRI) plans to develop a ‘menu’ of ESG and sustainability pathways for its signatories, in a bid to cater for increasingly divergent approaches to the topic.
The UN-backed body, whose 5,000+ members include some of the world’s biggest asset owners, managers and service providers, has faced criticism in recent years over its open door policy. As sustainability grows in importance as a marketing tool, and with some asset owners making PRI membership a requirement for managers wanting to win mandates, PRI has accepted a slew of new members with minimal responsible investment credentials.
While the body argues it must be inclusive, others have accused its lack of discern as enabling greenwashing.
Today, the body published the results of a month’s-long consultation with members about what they want from the PRI in the future. Just over a quarter of its signatories responded to an online survey, which was accompanied by a series of roundtables and meetings.
Speaking to IPE, David Atkin, who became chief executive officer of the PRI last year, said: “We’re now seeing very distinct differences in approach by investors, and differences in the maturity of those approaches and ability to execute on them.”
Nearly a third of those that responded to the survey said their current approach to responsible investment was strictly about managing ESG risks, but nearly two thirds believe that in the future there will be a bigger emphasis on identifying and acting on sustainability outcomes.
Some rulemakers in the US are trying to limit ESG practices to the management of short-term portfolio risks, while in Europe there are efforts to codify sustainability objectives into financial regulation, but Atkin said these regional trends were not reflected in the results.
Instead, he said, the main split was between big, long-standing PRI signatories – especially asset owners – and newer entrants.
Atkin said a core set of members wanted to work with the PRI “in a more engaged way when it comes to shaping the future of responsible investment”.
“We need to make more space to work with that leadership group,” he said. “But it’s also important to acknowledge that 30% of signatories don’t subscribe to the view [that responsible investment is about sustainability objectives], and we need to make sure we continue to support them in integrating ESG risks.”
To do this, the PRI plans to develop “voluntary progression pathways”, which provide a options for how its members can improve their responsible investment performance, depending on their approach or priorities.
Atkin said the project still needed to be fleshed out, but that some of the pathways could be based around investment objectives, while others might focus on strategies, asset classes or thematic topics.
“Our thinking is to create support programmes focused on what different types of investors want to improve on. A signatory can choose one, and we’ll allocate our resources to developing guidance and tools to help them work on it. The information from their reports will tell them if they’re improving in the way they’d hoped based on that pathway.”
The PRI will work with signatories over the coming year to co-design the pathways.
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