The PRI in 2024
After a couple of problematic years for the PRI reporting process, can the Progression Pathways refocus the important role that the PRI has in delivery investment outcomes?
William Bryant, Head of Advisory
For the last decade, the UN supported PRI has been the focal point for responsible investment and the unofficial standard for responsible investment that asset owners and investment managers have lived up to. The number of signatories to the PRI has quadrupled since 2013, testament to the widening adoption of responsible investment practices, notably the integration of ESG information into investment decisions (Principle 1) and increased stewardship activity (Principle 2).
More recently things have been slightly more challenging for the PRI. In a recent book written by an ex-PRI employee, former CEO Fiona Reynolds said, “I felt when I left [2022], PRI was becoming too slow in its decision-making and too bureaucratic”. While at the same time being a signatory of the PRI had become a basic requirement for asset managers if they wanted to raise institutional capital, yet the bar for becoming a signatory was seen by many allocators as too low. For some it was felt that the PRI was focusing more on internal actions and signatory numbers rather than driving advancements in responsible investment activity, and real world outcomes.
The challenges faced led to a comprehensive revamp of the reporting process, which is the primary touchpoint for many PRI signatories. Systems issues hampered reporting, leading to the cancellation of 2022 reporting and a poor experience for many in 2023 caused frustration and delays. In the meantime, other reporting and disclosure requirements have come into force that potentially give greater insight into investment processes, notably the SFDR in the EU and the TCFD aligned climate-related reporting in various jurisdictions.
Against this backdrop of change and in response to the evolving demands of responsible investment, the current CEO of the PRI, David Atkin, initiated a comprehensive signatory engagement program upon assuming his role. This has resulted in the Progression Pathways initiative, which aims to provide a journey for signatories to progress their responsible investment activity. This will be a hugely important initiative, not just for the PRI, but also for the investment industry to be able to demonstrate to investors and society that capital allocation and ownership decisions are being taken in a more sustainable manner to address the challenges that society faces while generating attractive returns.
The PRI reporting process is focused on the process of investing and what that delivers, rather than specific metrics as the output of the investment process. The Progression Pathways, if implemented appropriately, can provide greater guidance to investors on how to enhance their investment activity. While 2024 is expected to be a year dedicated to the development of the Progression Pathways, NorthPeak Advisory hopes that as we move into the future, this framework will establish a foundation that enhances the PRI's place as the global focal point for guidance on responsible investment.
At NorthPeak, we continue to observe many managers diligently striving to implement the necessary practices to align with the six principles of the PRI. But we are also aware that groups have been leaving the organisation, such as the £33bn Nest pension, in the UK, that recently paused its membership. At the core of responsible investment is an approach of engagement and collaboration to improve actions and outcomes so that both valuations and values see improvement. NorthPeak Advisory firmly believes that doing this in a coordinated and concerted manner can increase the chances of success. The PRI plays a central role in supporting collaboration and driving this success, but it relies on the support and active engagement of its signatories.
Note: NorthPeak Advisory is a signatory of the PRI and has been since our inception, William Bryant our Head of Advisory sits on the Hedge Fund Advisory Committee, a position he also held at his prior employer Albourne Partners.
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