The woman at the helm of the United Nations-supported Principles for Responsible Investment and her team are on a mission to get asset owners to use their influence — and trillions of dollars in collective assets — to bring responsible investment into the mainstream, flex their engagement muscles and ensure their socially responsible behavior is used for good.
“Investors have an incredible amount of power,” said Fiona Reynolds in an exclusive interview with Pensions & Investments at the organization's office in London. “They have the ability to effect huge amounts of change, and they just need to come together and act.”
The PRI was formed in 2006 with six principles covering environmental, social and governance issues. The PRI initiative is associated with the United Nations Environment Programme Finance Initiative and the United Nations Global Compact. Its goal is to educate signatories on the implications of sustainability for investments and help them incorporate the principles into their investment decision-making and ownership practices. It is 92% funded through fees from member organizations — it has almost 1,300 signatories, ranging from asset owners to money managers and professional services firms representing a collective $45 trillion. The remainder is funded by profits from its annual conference and “small grants here and there,” Ms. Reynolds said.
The organization covers issues such as hydraulic fracturing, employee relationships and corruption. “We research and identify the key issues in that area, find leaders and laggards (in terms of companies), and try to bring (laggards) up to scratch. Our thing is not to target the issue itself, but get better disclosure so that investors can make informed decisions about the investments that they make. We do this on a collaborative basis: Money talks. One pension fund may not get a reaction — but get $30 billion talking to (a company), and you will start getting attention.”
And a recent study showed just how important sustainability and environmental, social and governance issues can be to investment. From the Stockholder to the Stakeholder, a September paper by Gordon Clark, director, and Michael Viehs, research fellow at the University of Oxford's Smith School of Enterprise and the Environment, in association with Arabesque Asset Management Ltd., examined 190 studies, reports and books. The study said 88% of that research showed solid ESG practices result in better operational performance of firms. And according to 80% of the studies, stock price performance is positively influenced by good sustainability practices.