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

About the PRI James Gifford, Executive Director PRI 21 January 2010. What is responsible investment? . What is responsible investment (RI)?

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

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

  2. What is responsible investment? • 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? ESG is an acronym, in use globally, describing the environmental, social, and corporate governance issues Ethical Investment + Values - Socially Responsible Investment Responsible Investment - Performance focus +

  3. Rationale for responsible investment • 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

  4. Rationale for responsible investment • 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

  5. 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

  6. 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

  7. Over 670 signatories, US$ 20 trillion AUM

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

  9. The six Principles 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 Principles 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.

  10. Principle 1 Proportion of signatories stating that some internally managed assets incorporate integration

  11. Principle 2 ESG issues addressed in engagement initiatives of signatories or their service providers

  12. Principle 3 Requested formats of reporting ESG issue policies, practices or performance %

  13. The six Principles 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 Principles 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.

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

  15. Clearinghouse activities • 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.

  16. Implementation support Engagement Clearinghouse Private equity work stream PRI in Practice Property work stream Reporting andAssessment survey Enhanced Research Portal

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

  18. 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

  19. Why join the PRI? • 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

  20. “I applaud the leadership of theinstitutions that have committed themselves to this undertaking, and urge other investorsaround the world to join this historic effort.” Ban Ki-moonUN Secretary-General

  21. www.unpri.org e: james.gifford@unpri.org t: +44 (0) 207 749 5106

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