Annual Report 2010

More and more pension funds are asking their investment managers to invest responsibly, and participation in the PRI is becoming the way that most are choosing to demonstrate this.

However, responsible investment is still very much in its infancy in many organisations, regions, asset classes and investment approaches. In 2009, the PRI Board developed a new five-year strategy based on expanding the PRI’s implementation support activities, services to signatories and global outreach. The key elements are outlined below.

“Principles are important, but they are only valuable if they drive real change in the market. The PRI has now moved from its initial phase of exploration and awareness-raising towards a more service-oriented organisation that will not only promote the principles, but provide concrete support to signatories to help them implement responsible investment in an efficient and effective way. Signing and implementing the PRI is now the primary way in which investors demonstrate to clients, beneficiaries and stakeholders that they are taking ESG issues seriously and doing so within a mainstream, fiduciary context.”

James Gifford, Executive Director

Supporting signatories in their implementation of the Principles

As outlined in other parts of this report, the PRI Initiative is currently providing a range of implementation support activities, including:

• access to in-depth information and tools on implementing the Principles;
• facilitation of collaborative investor activity through forums like the PRI Clearinghouse and regional working groups;
• webinars, events and discussions across a broader range of emerging issues;
• updates to keep signatories abreast of the latest trends, ideas and best practices in responsible investment;
• reporting and assessment process;
• opportunities to link with other relevant groups such as academics, policy makers and NGOs.

More information about the PRI’s implementation support programme is contained throughout this report.

Setting up in the UK

The PRI is a collaboration between investors and two UN initiatives: UNEP Finance Initiative and the UN Global Compact. Since its launch in 2006, it has been administered under the Foundation for the Global Compact in New York. With a growing Secretariat in London, two new UK entities have been established: PRI Association and PRI Foundation. PRI Association now conducts most of the operational activities of the Initiative. PRI Foundation is a registered charity in the UK, and will be used for fundraising and the public-benefit elements of the PRI work programme. The PRI Board, elected from within the asset owner signatory body plus two UN representatives, has been renamed the PRI Advisory Council. This group then appoints the members and boards of PRI Association and PRI Foundation.

A strong partnership with the United Nations

The Executive Directors of UNEP and the UN Global Compact sit on the PRI Advisory Council in an ex officio capacity. The PRI Initiative will continue to be a strong partnership between investors and the UN, with many joint activities. We are also delighted that in December 2009, the PRI Initiative was acknowledged by the UN General Assembly in its resolution “Towards Global Partnerships”. We are also thankful for the continuing support of Secretary-General Ban Ki Moon.

Introduction of subscription fees

When the PRI was launched in 2006, it was decided that initially, the fees should be voluntary to be as inclusive as possible. For the first five years, voluntary fees have been sufficient to allow the Initiative to establish itself and set up the core implementation support programme. Around one third of signatories contribute financially to the running of the Initiative. In 2009, the PRI Board decided that if the Initiative is to truly fulfil its potential in mainstreaming responsible investment globally, this would require additional resources, and we should therefore move to a mandatory fee model. It was also felt that the PRI had grown to the point where we were delivering a strong value proposition to signatories and it was reasonable to ask for a contribution from all signatories.

The fee will be scaled depending on fund size, with a range of bands starting at £330 for small organisations to £6,600 for large funds. The introduction of this fee structure will ensure the Initiative has a strong financial footing into the future, enabling the delivery of considerably more implementation support activities, signatory services, and regional activities.

Greater transparency from 2012

We have seen rapid growth in the number of signatories willing to publish their full responses to the PRI annual survey, with 190 signatories publishing in 2010, up from just 70 in 2009 and 35 in 2008.

It is core to Principle 6 of the PRI that investors report on how they put the Principles into practice. From 2012, increased transparency requirements will be introduced as part of the annual PRI survey process. A consultation will take place in 2011 to determine what form this should take. Signatories will not be asked to disclose data that are commercially sensitive in nature.

”At PGGM we report both quantitative and qualitative data such as our responsible investment policies, voting and engagement activities, exclusions and integration of ESG factors in our investment activities. Transparency about our investment activities and our implementation of the six Principles of the PRI is important to PGGM. Although it takes time and resources, it generates positive feedback and helps people understand what can and cannot be done by an investor.”

Else Bos, Chief Institutional Business, PGGM

Moving towards 2014

All these changes aim to provide the Initiative the robust foundation needed to expand its services to signatories and its influence as a global agency driving responsible investment within the market. In the coming months and years, signatories can expect the PRI’s activities to grow in three directions:

1. Within portfolios

The PRI Initiative will be applying considerable additional resources to supporting implementation across asset classes such as fixed income, private equity, property, infrastructure and ESG-themed investments. The Initiative will also be exploring responsible approaches to passive investments, quant funds and hedge funds.

2. Within the industry

The PRI Initiative will also enhance our collaborative activities, bringing together investors globally to collaborate on company and policymaker dialogue through the PRI Clearinghouse, Academic Network and Public Policy Network.

3. Across regions

Responsible investment needs to be adopted by the mainstream in all countries with established capital markets. The PRI will expand its country networks to deliver in-depth support in local language and within the local context.

In summary, the PRI Initiative is in a strong position going forward, and we believe these changes will deliver better services to signatories, more in-depth coverage of issues and the faster adoption of responsible investment across global markets.