The United Nations-backed Principles for Responsible Investment organization will be engaging with U.S. policymakers to help them catch up on sustainable financial policy reforms, and it is encouraging its signatories to do the same.
Other countries are "acting with growing urgency to adopt measures that integrate responsible investment," but the U.S. "remains a glaring outlier" when it comes to a global policy consensus on sustainable finance, CEO Fiona Reynolds said in an Oct. 17 letter to PRI's 510 U.S. signatories.
The PRI represents more than 2,500 signatories globally, including asset managers and owners with a total $86.3 trillion in assets, including more than 500 U.S. entities.
The letter cites "a string of regulatory rollbacks under the Trump administration in recent years that have undermined policies on good governance, transparency and ESG integration in the investment process."
One example of those rollbacks was a 2018 Department of Labor policy on incorporating environmental, social and governance factors into investment decisions that reaffirmed fiduciaries' obligation to do so, but included language "that has had a chilling effect on ESG integration," the letter said.
The DOL's policy warns fiduciaries bound by ERISA to avoid "too readily" treating ESG factors as "economically relevant" to investment choices.
At the Securities and Exchange Commission, the PRI took issue with a proposed change to public company financial reporting requirements that would give companies more discretion in ESG disclosures, and new guidance on proxy voting and advisers.
The SEC ESG disclosure proposal would shift to a principles-based regime from a rules-based one that PRI officials believe would reduce investor access to consistent, comparable data.
They also worry that the two proxy guidance documents would increase risks for proxy advisers and could allow companies to exclude shareholder ESG proposals.
By contrast, the world's 50 largest economies except for the U.S. now have more than 500 policy instruments that support, encourage or require investors to consider long‐term value drivers, including ESG factors, a PRI analysis found.
More than 20 countries have enacted rules requiring companies to disclose ESG information, the PRI said.
The increased engagement with U.S. policymakers will focus on three areas: ESG disclosure, shareholder rights and fiduciary duty.
The effort will include pressing Congress and the SEC to adopt policies for integrating material ESG factors into a sustainable financial system. It also will work to give signatories information and resources to help them participate in policy debates.
"Active ownership is not just about engaging with corporations; engagement by the investment community with financial policymakers and regulators is an important extension of an investor's responsibilities and duties to protect the interests of beneficiaries," Ms. Reynolds said in the letter.
The growing global network of PRI signatories "is becoming more and more involved in the policymaking process in countries across Europe and Asia, but here in the U.S. we see real opportunity for increased engagement. This letter is a rallying cry to our signatories to engage with policies that could significantly impact their bottom lines," said Chris Fowle, head of Americas at the PRI, in a statement.
PRI signatories are stepping up their engagement globally, according to a PRI paper, "Taking stock: Sustainable finance policy engagement and policy influence," which found that the percentage of PRI signatories engaging policymakers around the world grew to 61% of asset owners in 2019, up from 56% in 2018, even while the number of PRI signatories grew just 6%.
The PRI also recently released a report for its Fiduciary Duty in the 21st Century program, aimed at producing evidence to support incorporating ESG standards into regulatory conceptions of fiduciary duty. The report includes detailed country-specific analysis of the current policy and regulatory landscape along with recommendations.
Unlike other markets where ESG issues are being incorporated into expectations around fiduciary duty, regulators in the U.S. "continue to cling to an outdated conception of fiduciary duty that ultimately puts the American financial industry at a disadvantage in the rapidly evolving global economy," said Will Martindale, PRI director of policy and research, in a statement.
In the U.S., PRI signatories are already integrating ESG factors into their investment decisions, but they "are eager to see progress from policymakers when it comes to fiduciary duty," said Heather Slavkin Corzo, head of U.S. policy for PRI.
