United Nations Principles on Responsible Investment
The Principles on Resposible Investment (PRI) are designed to provide a framework for investors to consider issues around the environmental, social and governance (ESG) issues that can affect investment portfolios. They were launched by UN Secretary-General in April 2006 at New York Stock Exchange and state:
- We will incorporate ESG issues into investment analysis and decision-making processes
- We will be active owners and incorporate ESG issues into our ownership policies and practices
- We will seek appropriate disclosure on ESG issues by the entities in which we invest
- We will promote acceptance and implementation of the Principle within the investment industry
- We will work together to enhance our effectiveness in implementing the Principles
- We will each report on our activities and progress towards implementing the Principles
By complying with these principles investors should have a more complete understanding of what they are investing in which, in turn, should lead to increased returns and lower risk. It is hoped that by implementing the principles investors will focus more attention on such issues and therefore develop appropriate metrics and reporting. This should then improve overall corporate performance on ESG issues.
Signatories can include asset owners, investment managers or professional service partners. The one mandatory requirement is that signatories complete the annual reporting process which documents their progress towards achieving the principles.
- There are 1260 signatrories, includuing asset owners, investment managers and service providers.
- There is US$45 trillion worth of assets under management.
The Principles were developed from April 2005 to January 2006 in a process led by a group of the world’s largest institutional investor alongside a 70 person multi-stakeholder group.
An independent organisation, the PRI Initiative, was created to help investors implement the Principles. This was originally administered by the UN Global Compact, however since 2010 it has now been established as a legal entity in the UK.
The PRI is governed by an elected Advisory Council of 11 representatives from asset owner organisation and 2 from the UN.
Largest proportion of income comes from membership fees, compulsory since April 2011. The fee varies depending on the size of organisation (£330 - £6,600). Income in 2013 is £3,637,000.
- These principles can be applied to any investment style and are not just designed for socially responsible investment. Instead they aim to incorporate environmental, social and governance issues into mainstream investment policies.
- Almost 800 signatories from over 30 countries have publicly disclosed their progress towards implementing responsible investment. Signatories will begin to receive their assessment reports in October.