Maintaining responsible investment standards

Jul 02, 2018
After 185 signatories were placed on a watch list by the UN-backed Principles of Investment (PRI) for failing to apply the necessary doctrines, Andrew Holt spoke to PRI CEO Fiona Reynolds about what this means for the organization

Why were the 185 signatories placed on a watch list?

These investors have failed to meet the minimum standards for responsible investment that the PRI has outlined, so they have been put on a watch list.

What are the major areas of failure for the signatories?

Those on the watch list have failed to meet the three minimum criteria the PRI has defined, namely:

– An investment policy that covers the firm’s responsible investment approach, covering more than 50 percent of assets under management

– Internal/external staff responsible for implementing the responsible investment policy

– Senior-level commitment and accountability mechanisms for responsible investment implementation.

Is it disappointing that 185 signatories have done this?

These numbers were in line with what we were expecting. There can be legitimate reasons why some of our signatories are failing to meet the minimum stands, which is why we want to work with them to help them improve performance.

Have you had this problem before? 

We have known for some time that a number of investors were signing up to the PRI without any real commitment to the principles. That’s why we decided to take action and strengthen our accountability measures.

Could the problem be that organizations like to talk positively about responsible investment but fail to apply the principles in any serious way?

Certainly. Some investors do not fully commit to responsible investment practices. With our new accountability measures, we will be able to see whether investors can demonstrate real commitment to sustainable investing.

How do you plan to deal with these signatories: with a firm approach or a more diplomatic one?

We will work proactively with those on the watch list to help them improve their performance. We don’t want this to be a punitive exercise but a collaborative one. Signatories that do not meet the criteria will be informed privately and delisting will only be as a last resort following unsuccessful engagement over a two-year period.

Do you think the problem could be that the principles are too dogmatic?

The principles are aspirational, not dogmatic. Sometimes the problem is a lack of investor resources and sometimes there is a lack of commitment. We want to identify those investors that are not fully committed to the principles.

What, if any, lessons have you learnt from this process?

We are just at the beginning of our new accountability model so it will be interesting to see what kind of feedback we receive when we start working with those that are not meeting the minimum requirements. We are keen to ensure the PRI brand is strong, has meaning in the investor space and that the investment community understands: we will not let our members use the PRI as a kitemark.

  

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