Supporting implementation

Objective 1

Support signatories in making progress towards implementing the Principles

The PRI produces guides, case studies, webinars and events to help investors implement the Principles into their investment practices, in a systematic way, within each asset class. Around 200 organisations sit on PRI advisory committees and working groups to ensure that our work is relevant to the day-to-day challenges they face.

Integration/active ownership across asset classes

80% RI in directly held asset classes, against a KPI target of 80%

47% portfolio construction/fair value, against a KPI target of 60%

Taking integration to the next level

To guide investors – both asset owners and investment managers – who are implementing ESG integration techniques in their investment processes, we released A practical guide to ESG integration for equity investing. It is the most comprehensive description to date of what ESG-integrated analysis is, and how it works in practice.

The guide contains information and over 50 case studies on integration techniques that can be applied across fundamental, quantitative, smart beta and passive strategies. It immediately established itself as the go-to guide for practitioners in responsible investment’s primary asset class, and to date has been downloaded nearly 20,000 times.

We also launched a project with the CFA Institute on a global study to determine how widely ESG factors are considered by mainstream investors. We believe this collaboration will determine the depth of the remaining barriers to ESG integration, particularly on the part of asset managers.

Active strategies employed by signatories for directly managed listed equity assets (% AUM)

Active strategies employed by signatories for directly managed listed equity assets (% AUM) s

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CASE STUDIES

Integrating diversity

Trillium Asset Management integrate diversity, including gender and race at the company and board level into their investment research process.

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Linking ESG ratings to returns and volatility

New Amsterdam Partners analyse the correlation between ESG ratings and stock returns, volatility and risk-adjusted returns.

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Understanding the materiality of tax avoidance

MFS Investment Management consider tax gaps when engaging with companies.

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Promoting systematic ESG consideration in credit ratings

Building on the successful launch of the ESG in Credit Ratings Statement, we developed the first in a three-part series on ESG factors in credit risk analysis. Shifting perceptions: ESG credit risk and ratings – part 1: the state of play looks at why ESG factors matter in credit risk analysis, what investors and CRAs are doing on the matter, and what their expectations are. It found that while there is tangible evidence of ESG consideration by investors and CRAs, they are at different stages in the process. The report suggests there is a way to go until it becomes standard practice.

Active strategies employed by signatories for directly managed fixed income assets (% AUM)

Active strategies employed by signatories for directly managed fixed income assets (% AUM)

Split of directly managed fixed income assets by active and passive strategies (% AUM)

Proportion of fixed income assets for which signatories report using active or passive strategies

In collaboration with the Alternative Investment Management Association (AIMA) and the Hedge Fund Standards Board (HFSB), we developed the first industry-standard due diligence questionnaire (DDQ) for hedge funds. The DDQ is a tool to assist asset owners in their process for selecting managers.

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For private equity, to follow the limited partner responsible investment DDQ, we have been developing a fund terms guide to support their appointment efforts. We have also established a working group to start developing a monitoring tool.

Following a year-long consultation, we launched Incorporating responsible investment into private equity fund terms, the second in a trilogy of tools to help LPs in their manager selection, appointment and monitoring. It identifies current and emerging best practice – as well as the potential constraints – of incorporating responsible investment into private equity fund terms and offers practical steps to LPs and GPs considering it.

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We launched a new infrastructure project to respond to the growing demand for sustainable infrastructure solutions in both developed and emerging markets. Through this project, we will provide industry guidance on incorporating ESG issues into infrastructure investing, share good practice and promote investment into low-carbon infrastructure.

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KEY STATS

Proportion of directly and indirectly held assets managed by investment managers and asset owners respectively covered by responsible investment practices (% AUM)

Hedge funds

2016
AO: 63%
IM: 26%
2017
AO: 67%
IM: 38%

Private equity

2016
AO: 93%
IM: 73%
2017
AO: 90%
IM: 95%

Infrastructure

2016
AO: 90%
IM: 79%
2017
AO: 84%
IM: 95%