By David Atkin, CEO, Principles for Responsible Investment
Last month, I wrote that in a world of compounding crises and political uncertainty, the role of responsible investment (RI) is more important than ever – but that we must work together and adapt to face a changing external landscape.
So what are the PRI’s next steps?
I wrote in my previous blog that last year, as inflation and the rising cost of living continued to bite, voters around the world opted overwhelmingly for a change away from the status quo. In some cases, this has made the political environment more challenging for RI. But how many of those voters would really agree that they want their savings managed by investors who don’t have a long-term mindset, or don’t seek to consider all the information at their disposal?
I think the answer is very few, which brings me to our real barrier – it’s one of communication and evidence.
Communicating RI’s long-term value creation story
At its core, RI is about improving investment decision-making – broadening the information considered when making fully informed risk adjustment decisions. For some time now, investors have been aware of evidence that the traditional balance sheet analysis doesn’t tell you everything you need to know about the business value of a company (for example, Ocean Tomo’s study showing that the tangible/intangible asset ratio of the S&P 500 moved from 80/20% to 10/90% between 1975 and 2020).
Applying an RI lens allows investors to capture relevant sustainability factors that are ‘intangible’, but potentially financially material – from the importance of access to clean water to business operations, to poor health and safety records leaving companies open to litigation or prosecution, to lax corporate governance resulting in pressures on the social licence to operate.
Investors have seen many examples over the past twenty years of shareholder value being destroyed because of these ‘intangibles’. However, RI approaches have allowed investors to better assess risks and opportunities for value creation and expected returns, over the short, medium and long term.
Ultimately, we must equip our global signatory base and the whole RI community with the evidence to point to RI’s long-term value creation story.
I’ve served as CEO of major Australian pension funds, and I’ve seen it proven many times that quite simply, without an RI lens, you can’t see the full picture. This should be uncontroversial – but it hasn’t been communicated clearly and consistently enough, and this has enabled opponents of RI to exploit a lack of mainstream understanding about what it is that investors actually do.
Countering confusion
At this point, we see it as our responsibility to counter this confusion – we must remove any possibility of misunderstanding about the role of responsible investors in the financial system. Re-articulating the financial value that results from decisions informed by RI considerations will be a critical, ever-evolving tool for us and the RI community. It will help us endorse the validity of RI, setting out the clear link between sustainability considerations and the delivery of long-term returns to their fiduciaries.
This piece of work is underway, involving a group of PRI specialists who will forge impactful partnerships with signatories and external stakeholders in the RI ecosystem to add critical value. Ultimately, we must equip our global signatory base and the whole RI community with the evidence to point to RI’s long-term value creation story.
Additionally, we must recognise that investing is nuanced by a whole range of factors, including region, asset class and scope of the investment vehicle. This means that as well as looking to create a universal RI value creation story, the detail matters too.
Convening asset owners ahead of COP30
As we look ahead to the PRI’s 20th anniversary in 2026, we’ll be drawing on the lessons we’ve learned across the past two decades to chart our path forwards. The landscape for RI has changed dramatically since the PRI’s founding, yet the sustainability challenges that were concerns twenty years ago have only grown more pertinent and urgent.
To meet these challenges, we’ll be looking to our signatory community and particularly asset owners to lead the way. With their long-term lens and position at the top of the investment chain, asset owners – as I know from my own professional experience – are uniquely positioned to inform the way RI is implemented, and clear signals from asset owners about their RI needs can be helpful to investment managers and the wider investment community too. At the PRI, we’ll seek to renew and adjust our work to support asset owners, starting with a series of collaboration opportunities over the course of this year.
We’ll seek to renew and adjust our work to support asset owners, starting with a series of collaboration opportunities over the course of this year.
Speaking of collaboration, I’m delighted that PRI in Person 2025 will bring us to São Paulo, our first visit to Latin America in over ten years. Brazil has long been an important RI market – Previ, the nation’s biggest pension fund, was a founding signatory of the PRI – and this is a pivotal opportunity to bring the global RI sector together there, just ahead of COP30. We have a critical window to elevate ambitions in the global transition to net zero, with national climate action plans (NDCs) being updated this year.
We also have an opportunity to drive capital mobilisation to the global south, both to mitigate the systemic risks of climate change and to realise the benefits of the economic transition. Bringing the world’s largest responsible investment conference to COP30 host nation Brazil sends an important signal to policymakers, clearly showing that investors support climate action as part of their core fiduciary duty.
A new digital experience for signatories
In the meantime, our work at the PRI goes on behind the scenes. Later this year, we’re preparing to launch an exciting overhaul of the digital experience for PRI signatories. You’ll start to see our plans emerging in April, building towards a full launch by PRI in Person in November. The changes will include a new PRI website, where signatories will benefit from a personalised dashboard, access to progression pathways, and support resources to help you navigate our vast library of content.
Putting all this information more readily at your fingertips is another way to drive progress on RI, and a step towards reducing the communication barriers I already mentioned.
“A pivotally consequential year”
This is a tough time to be a responsible investor. Ultimately, I believe we may look back on 2025 as a pivotally consequential year for RI globally. At the PRI, we’re recommitting to what we know to be true: an economically efficient, sustainable global financial system is a necessity for long-term value creation, and only a broad tent will get us there. We can’t achieve our mission alone – but I know we don’t have to. Our community is resilient, and together we can overcome the obstacles in our path. The need for a strong, global, multilateral approach to RI has never been greater.
There are immediate ways you can contribute. You can put yourself forward to serve on our PRI in Person 2025 advisory forums, prepare an entry for the PRI Awards – this year including a new category for excellence in RI communication – or expand your RI knowledge through the PRI Academy. And as always, you can find a host of other ways to get involved on our website. The PRI stands ready to work with you over the year ahead, and beyond.
This blog is the second in a two-part series. The first part can be found here.
