Governance review could simplify structure and boost transparency to quell complaints from signatories
The UN-backed Principles of Responsible Investment (PRI), which has faced accusations of authoritarian decision making in recent months, has launched a review process that could simplify its governance structure and bolster transparency.
The review, to be carried out by an independent, external organization or individual, will also examine ways to ensure leaders are accountable to signatories while ensuring the body retains an asset-owner majority. The review will not alter the asset-owner majority on the PRI governing council but it will reconsider the level of representation of non-asset-owners, such as fund managers.
The PRI says the organization’s incorporation as a not-for-profit company under UK law in 2010 resulted in a ‘complex’ governance structure that gave more responsibilities to the council.
‘Some signatories, however, have raised concerns about the process used to adopt the new legal and governance structure and elements of the new constitution, particularly how these changes affected the rights of asset-owner signatories,’ PRI states in a press release. ‘After listening to these concerns, the council [has] agreed… to carry out a formal review of PRI’s governance.’
PRI signatories have until February 28 to comment on the draft review, which will be updated periodically. A summary of the feedback on the draft is due in March. The PRI will also issue a request for proposals in that month for an independent reviewer.
Six large Danish investors ‒ ATP, Industriens Pension, PensionDanmark, PFA Pension, PKA and Sampension ‒ announced in December that they would leave the PRI. They issued a press release saying that ‘over a sustained period of time, [we have] observed with concern that the governance of the PRI organization does not live up to the basic standards we as investors would expect of the companies in which we invest.’
