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About the PRI James Gifford, Executive Director PRI 21 January 2010.

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Presentation on theme: "About the PRI James Gifford, Executive Director PRI 21 January 2010."— Presentation transcript:

1 About the PRI James Gifford, Executive Director PRI 21 January 2010

2 What is responsible investment (RI)? RI incorporates an active consideration of environmental, social, and corporate governance (ESG) factors within investment decision making and ownership practices What is ESG? What is responsible investment? + Values - - Performance focus + Ethical Investment Socially Responsible Investment Responsible Investment ESG is an acronym, in use globally, describing the environmental, social, and corporate governance issues

3 2005 Freshfields report: “Integrating ESG considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in all considered jurisdictions” RI is more comprehensive approach to identifying investment risks and opportunities ESG issues can impact investor returns especially in the long-term Rationale for responsible investment

4 Strong ESG performance can result in new opportunities and reduced risks for investee firms According to The McKinsey Quarterly (Feb 2009): 80% of CFOs and professional investors believe that ESG information can serve as a proxy for the quality of a company’s management Investors can play an important role in promoting good corporate practice within their portfolio companies through active ownership RI policies consistent with good governance Company reputation can be protected Rationale for responsible investment

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6 The PRI is not… About sacrificing returns to save the world About philanthropy About exclusion of “unethical” stocks from portfolios A prescriptive/compliance-based standard

7 The PRI is… A tool kit for integrating ESG issues into mainstream investment practices and across asset classes Grounded in fiduciary duty Voluntary and aspirational A global collaborative investor network A forum for discussion and concrete action on long-term risk issues and value drivers A Secretariat providing practical guidance on emerging ESG issues and implementation support for signatories

8 Over 670 signatories, US$ 20 trillion AUM

9 Signatories include CalPERS, US BT Pension Scheme, UK PGGM, Netherlands PREVI, Brazil National Pension Service, Korea HSBC Global Asset Management

10 The six Principles 1.We will incorporate ESG issues into investment analysis and decision-making processes. 2.We will be active owners and incorporate ESG issues into our ownership policies and practices. 3.We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4.We will promote acceptance and implementation of the Principles within the investment industry. 5.We will work together to enhance our effectiveness in implementing the Principles. 6.We will each report on our activities and progress towards implementing the Principles.

11 Principle 1 “The hardest principle to implement” According to 62% of signatories 34% Of signatories integrate RI to a large extent Proportion of signatories stating that some internally managed assets incorporate integration

12 Principle 2 “Companies that manage social and environmental issues and wider stakeholders likely to be better investments in the long run” Insight Investment 5% Of signatories fail to do any engagement activities with investee companies ESG issues addressed in engagement initiatives of signatories or their service providers

13 Principle 3 “We are systematically analysing the quality of companies’ disclosure on ESG issues” Fortis Investments 70% Signatories have asked for standalone CSR or sustainability reports PREVI Signatory has been leading Brazilian investors efforts to increase number of companies reporting on ESG issues Requested formats of reporting ESG issue policies, practices or performance %

14 The six Principles 1.We will incorporate ESG issues into investment analysis and decision-making processes. 2.We will be active owners and incorporate ESG issues into our ownership policies and practices. 3.We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4.We will promote acceptance and implementation of the Principles within the investment industry. 5.We will work together to enhance our effectiveness in implementing the Principles. 6.We will each report on our activities and progress towards implementing the Principles.

15 Engagement Clearinghouse Collaborative discussions among investors Dialogue with companies Joint letters Proxy votes Public endorsement Public policy dialogue

16 210 Clearinghouse posts since inception 8,804 companies sent at least one letter in 2008/9 as a result of engagements organised through the Clearinghouse: Addressing “Acting in concert” regulations: Letters to EU Commission, Italian Consob and Spanish Comisión Nacional del Mercado de Valores UN Global Compact: 52 investors, representing US$ 4.4 trillion of AUM wrote to 9,000 companies to encourage them to endorse the UN Global Compact A collaboration to persuade the world’s largest companies, including Royal Dutch Shell and Heineken, to sign up to the CEO Water Mandate, a UN water sustainability initiative. Clearinghouse activities

17 Implementation support Engagement Clearinghouse PRI in Practice Reporting and Assessment survey Private equity work stream Property work stream Enhanced Research Portal

18 Implementation support: Networking PRI Academic Network Country networks Small Funds Initiative Public policy network PRI in Person PRI Webinars

19 PRI and stock exchanges Stock exchanges are becoming increasingly active in raising ESG standards among listed companies. Recent PRI event examined ways in which stock exchanges promote sustainable business practices such as enhanced sustainability reporting requirements for listed companies and the establishment of ESG indices Currently three exchanges are signatories to the PRI and more exchanges are considering signing

20 Improve your understanding and management of complex emerging issues, risks and value drivers Gain access to a comprehensive knowledge bank of implementation support, reducing research and implementation costs Be part of a global network of peer investors exploring and acting on ESG issues Reputational benefits from publicly demonstrating top-level commitment to integrating ESG issues in a way that is consistent with fiduciary duty Contribute to a more long-term oriented, transparent, sustainable and well-governed capital markets Why join the PRI?

21 “I applaud the leadership of the institutions that have committed themselves to this undertaking, and urge other investors around the world to join this historic effort.” Ban Ki-moon UN Secretary-General

22 e: t: +44 (0)


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