Principles for Investors in Inclusive Finance (PIIF): Report on Progress 2015

This Report on Progress analyses the 2014 data from both indirect investors (who invest through fund managers and other intermediaries) and direct investors (who invest directly into retail institutions which provide financial products and services to the end client). It is one of the associated outputs of PIIF’s reporting process, fostering dialogue and learning both within organisations and between direct and indirect investors.

Indirect investors

• Of the 40% who take the PIIF into consideration when agreeing and designing contracts, improvements have been made across most principles, except for principles 4 (ESG integration) and 7 (collaboration on standards).
• In the 2014 PIIF report, we recommended that indirect investors (pension funds and other investors who use external managers to invest on their behalf) should include consideration of PIIF in their selection. In 2015 the implementation of the PIIF among indirect investors remains relatively low, with around 60% of indirect investors in inclusive finance taking the PIIF into account in due diligence and monitoring, but only around 40% doing so in contracts and mandates.
• While most (75%) actively disclose information, not many (27%) do so according to industry standards.

Direct investors

• The Client Protection Principle are, once more, universally accepted among investors (90%) demonstrating that investors are actively integrating this principle into their investment processes and business practices.
• While the data indicates some progress with regards to the percentage of signatories that have adopted and formalised policies and procedures to encourage investee skills (39% in f15), trained investor fs staff to monitor loans and non-performing loans (30% in f15), as well as in setting up voluntary work groups to help the investee (33% in f15); these figures do remain low.
• Clear improvements have been made among investors adopting social and environment performance indicators (70%), especially for the due diligence process. However, just a third provide monetary incentives linked to social performance measure.
• Three quarters of the respondents provide clients and/ or the public with information aligned with industry standards. The data also indicates a high-commitment among investors to promote transparency for their shareholders, stakeholders and clients.
• There is collaboration between investors but less so between investors and investee retail institutions, a trend which continues on from 2014 fs data. The vast majority of these investors don ft encourage their investees to become members of one or more organisations.

Conclusion

The data received from signatories in 2015 shows an overall improvement in almost all seven principles of the PIIF when compared to the 2014 data. An increasing number of signatories have adopted and applied tools to report social performance. The data also indicates that investors are committed to collecting not only financial, but also social indicators from their investees. The examples of organisations highlighted in this report demonstrate a genuine interest in tracking relevant social indicators to support investors’ financial decisions.

Problem areas, however, follow the same pattern as the previous years. Two areas stand out in particular (fair treatment of investees and standardisation of social performance indicators) in the 2015 data. Improvements in these two areas are also applicable to other environmental and social-themed investments.

Investors are encouraged to show even further commitment towards the PIIF goals and act as catalysts for other organisations to improve their social performance in this industry.