In order to continue the fight toward a sustainable future, the United Nations-supported Principles for Responsible Investment must grow sharper teeth, its leadership maintains.
“The credibility of the PRI has to be protected and maintained,” said Fiona Reynolds, managing director at the PRI, based in London. “Signatories cannot just use us for our brand. At the moment, we delist (signatories) if they don’t do the reporting. But what if they do report, and we see no progress or commitment to progress? We need to tackle that issue. It is not an easy thing.”
The organization has also embarked on a number of projects to build its profile and the case for responsible investment. It is supporting the Montreal Carbon Pledge, which asks that investors commit to measure and publicly disclose the carbon footprint of their investment portfolios annually and is working hard on climate change issues at the request of signatories in the run-up to the 2015 United Nations Climate Change conference, which will take place in Paris.
“Signatories want more information on climate change. They understand it … but we need to develop more best practice around climate change integration” in investment practices.
Divestment from fossil fuels, she said, is not necessarily the answer. “If (investors) want to, that’s fine — but if everyone just divests, then where will energy sources come from? Investors’ discussions need to be how to transition from high- to low-carbon economies – these are conversations they need to be having with companies,” said Ms. Reynolds.
The projects around sustainable investment and the PRI's work are also getting increased attention from endowments — the $36.4 billion Harvard University endowment and the University of California, with $91 billion in endowment and other assets, are recent signatories, she said.
The organization has worked hard to identify best practice in equity investments, “which is easier as (investors) have voting rights attached, a track record, and there is an acceptance that well-governed companies perform better; but what about the rest of the portfolio?” The PRI has worked on fixed income over the past year, and will spend the coming years focusing on other asset classes. “Our intention is to do more work, particularly around property, fixed income and hedge funds.”
That leads to education — another tool the PRI has for increasing ESG awareness and its own effectiveness. The PRI recently purchased the Responsible Investment Academy, an online training group that has been renamed the PRI Academy. Work is underway to transform the group to reflect the PRI’s work. “Eventually I would like to have some kind of accreditation for practitioners that is global, and the PRI is the natural place to do that,” said Ms. Reynolds.
One of the best tools the PRI wields in its work is continued engagement with signatories. And it is that continued engagement that will see the PRI further expand across the globe. “Being based in London can also mean that our center of knowledge is a bit European,” said Ms. Reynolds. “So how better can we understand the issues around the world and help advance policy in different regions?”
Its signatory base might be diversified, but its office space is not. “We have a big U.S. focus over the next couple of years — we intend to open our first office outside of London in New York … and then further down the track, to have an Asia-Pacific office. That is recognition that those three markets are very different. The world is very big, and we need to work regionally. We have to have more impact in the U.S. — we have a lot of signatories in the U.S. (by number), but compared to the size of that market, it is small. We want to have a globally sustainable financial system, and we cannot do that if we are missing chunks.”