What is the PRI? Sara Cota scota@arlingclose.com

The Principles for Responsible Investment (PRI) is the world’s leading advocate of responsible investment. It works to support the incorporation of environmental, social, and governance factors (ESG) into investment decision-making.

The PRI is independent and acts in the long-term interests of its signatories, financial markets and economies in which they operate. It encourages investors to use responsible investment to improve returns and better manage risks but does not operate for its own profit. While it engages with global policymakers, it is not associated with any government; it is supported by, but not part of, the United Nations.

Launched in 2006, the PRI is funded primarily through an annual membership fee payable by all signatories. Additional funding comes from grants from governments, foundations, and other international organisations. The UN does not provide funding to PRI but had a large role in its founding.

The PRI defines responsible investment as “a strategy and practice to incorporate environmental, social and governance factors in investment decisions and active ownership”.

What are the six Principles for Responsible Investment?

The six Principles for Responsible Investment provide a range of options for including ESG considerations in investment activities. Following these principles is voluntary and is signatory-based. By adopting them, these investors help build a more sustainable global financial system. These principles have gained support worldwide, covering most of the world’s professionally managed investments.

Principle 1:

We will incorporate ESG issues into investment analysis and decision-making processes

Principle 2:

We will be active owners and incorporate ESG issues into our ownership policies and practices

Principle 3:

We will seek appropriate disclosure on ESG issues by the entities in which we invest

Principle 4:

We will promote acceptance and implementation of the Principles within the investment industry

Principle 5:

We will work together to enhance our effectiveness in implementing the Principles

Principle 6:

We will each report on our activities and progress towards implementing the Principles

Source: https://www.unpri.org/about-us/about-the-pri

Collectively, asset owners, asset managers and service providers that have signed up to these six principles own or manage assets exceeding $121 trillion. Early signatories of the initiative from 2006 include asset managers such as Aviva, HSBC Asset Management, Federated Hermes and Insight and asset owners such as the BBC Pension Trust Ltd, the Canada Pension Plan Investment Board and the California Public Employees’ Retirement System (CalPERS).

The UN PRI has a large and diverse group of signatories. The PRI’s 2022/23 annual report shows there 5391 signatories of which 843 were in the UK and Ireland. By signing the Principles, they agree to act in the best long-term interest of their beneficiaries and recognise the importance ESG factors have on investment portfolios.

In addition to adhering to the six principles, signatories also agree to mandatory reporting to the PRI on their responsible investment activities and to make these reports available. Responses to all ‘core’ questions are publicly available and help stakeholders to assess investors ESG activities. These reports to the PRI improve transparency, demonstrate best practice and ensure signatories meet the increasing expectations for sustainability. This reporting requirement applies to all PRI signatories, regardless of size, geographical location, or their progress in implementing responsible investment principles.

Environmental and social issues are diverse and there is no single set of ESG definitions which are universally agreed or accepted. Organisations who do not have a specific ESG policy or criteria for investments can nevertheless prioritise investment counterparties and fund management companies who are signatories to major ESG-related initiatives, including the PRI. 

Arlingclose regularly monitors and provides clients a list of signatories as they relate to clients' treasury activity. 

Our ESG and Responsible Investment Service helps public sector clients navigate ESG complexities for treasury investments whilst remaining prudent custodians of public monies – please click the link or contact us for further information.

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