The Principles for Responsible Investment (PRI) has delisted five signatories for failing to meet minimum requirements, which it has indicated intending to increase.
This year was the first occasion that the PRI was able to delist signatories for not meeting minimum requirements since the model for doing so was introduced.
The biggest signatory to be kicked out is BPE, the private banking arm of France’s La Banque Postale, although in a statement it said this was for legal reasons in the sense that does not legally own listed securities held on behalf of its client and therefore “has not been able to fully comply with one of the six fundamental principles of the PRI regarding discretionary management”.
“BPE is currently working on resolving this legal constraint in order to once again adhere to PRI,” it said in a statement.
The only asset owner to be delisted is an entity called Stichting Gemeenschappelijk Beleggingsfonds, which is part of Dutch trade union FNV and, according to the PRI, has some $40m (€34m) in assets under management.
The other entities are identified as investment managers from Indonesia (Corfina Capital), the US (Primary Wave IP Investment Management) and France (Delta Alternative Management).
The delisting marks the end of a two-year process involving engagement by the PRI with those at-risk.
’We got them moving’
After in 2016 announcing it would delist signatories that did not live up to the PRI principles, in 2018 the PRI put 165 signatories on a watch-list and gave them two years to fix shortcomings.
By June last year the 165 had been whittled down to about 50.
Overall, in addition to the aforementioned five, 23 of the 165 either voluntarily delisted or were delisted for failure to submit an annual PRI report, the PRI said. Five further organisations only avoided delisting after appealing the PRI’s plan to remove them.
“Overall, our engagement with those signatories not meeting the minimum requirements in 2018 has been a success,” said Fiona Reynolds, CEO of the PRI. “92 per cent of those we engaged with went on to meet the minimum requirements by this year and are no longer at risk of delisting.
“We got them moving and that was probably more important,” she told IPE.
“The requirements on what it means to be a PRI signatory need to be increased further”
Fiona Reynolds, CEO of the PRI
The PRI also said the “final – and relatively small” number of signatories delisted reflected that the responsible investment market had matured since the minimum requirements came into effect in 2018, and that “the requirements on what it means to be a PRI signatory need to be increased further”.
Reynolds said the plan was also to only give signatories one year rather than two to meet the minimum requirements. The plan is to launch a consultation on the proposed new minimum requirements at the signatories’ general meeting on 21 October. Any changes made to the criteria will require approval of the board.
According to the PRI’s website, there are currently three minimum requirements, including that there is an investment policy covering the firm’s responsible investment (RI) approach that sets out either the firm’s overall approach to RI or formalised guidelines on environmental, social or governance factors, and covers more than 50% of assets under management.
Asked whether delisting five signatories was enough to satisfy the appetite for accountability, Reynolds said it would not be if the PRI were not also taking action on other fronts.
In addition to mentioning the review of the minimum standards, she cited the new reporting framework that was being rolled out in January, saying the bar to achieve the top score had been raised.
Further, at the “carrot” end of the spectrum, the PRI was doing more to recognise leadership among its signatories and planned to expand activity in this area over the coming years, Reynolds said.
IPE did not contact the other four delisted signatories for comment. The current minimum requirements can be found here. Currently there are 15 signatories at risk of being delisted for failure to meet the minimum requirements for PRI membership in 2021.