Responsible investment bodies: what is the PRI?

The Principles for Responsible Investment (PRI) is a United Nations-backed initiative that seeks to engage investors on environmental, social and governance (ESG) issues.

In 2005, UN secretary-general and Nobel Peace Prize winner Kofi Annan invited the world’s largest investors to develop a small set of principles for responsible investment.

Twenty institutional investors from 12 countries agreed to participate, and the PRI was born, before being formally launched at the New York Stock Exchange in April 2006.

“I think that it is important to point out that the PRI is aspirational, and we don’t prescribe what you can and can’t invest in”, the PRI’s executive director James Gifford told Blue & Green Tomorrow in July last year.

“You can invest in whatever you like – but the PRI talks about the importance of understanding what you’re investing in, and once you are invested, then having an on-going dialogue with the entities in which you invest.”

Drafted in 2005 and 2006, the six principles that help inform the role of investment in shaping our future are as follows:

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.

It’s striking that these clear principles were written up well before the financial crash of 2007 onwards, and it’s even more telling that the rate of institutional sign-up increased after the crash.

In April 2006, the PRI had around 100 signatories; by April 2012, it had over 1,000. Its assets under management have enjoyed similar growth in that time: from around $5 trillion to over $30 trillion.

Pension funds, insurance companies, sovereign wealth and development funds, investment managers, service providers and other supporters make up the PRI network. A number of UK-based asset owners are signed up, but if one you’re dealing with isn’t, you should probably ask why. If they are on the list, take a closer look at how seriously they report ESG issues.

We examined the inner workings of the PRI in a series of features published last summer.