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Signing up to ESG is not enough - UNPRI

GLOBAL - The United Nations' Principles for Responsible Investment (PRI) should filter through a signatory company and right through to the companies invested in, James Gifford, executive director at the UNPRI has urged.

The United Nations' Responsible Investment body is one of 10 nominees for an Outstanding Industry Contribution award at tonight's IPE European Pension Fund Awards in Viena, for its work in the area of environmental, social and governance (ESG) issues for investors.

"Signing the PRI is not an end in itself - it is just the beginning of the process," Gifford told IPE in an interview.

"There needs to be serious internal commitment across the organisation. It might be okay for the board or CEO to approve the PRI but the philosophy of the PRI has to filter through the whole organisation as well as through the service providers right down the investment chain to the companies themselves."

Around 200 institutional investors with aggregated assets of $11trn (€7.5trn) have so far signed up to the PRI which were published in 2006, including several large pension funds such as the Swedish buffer funds AP-Fonden, Dutch pension giant ABP or the UK's University Superannuation Scheme (USS).

"We would encourage funds even if they have not done anything in this area to sign the PRI as the first step rather than the last step on this journey because it is devised as an aspirational framework and once you sign it then you go from there," Gifford added.

As involvement with companies can be very difficult, the UNPRI has set up the first professionally-staffed global shareholder engagement clearing house to offer signatories to the PRI a platform where they can pool efforts on active shareholder engagement.
 
"There is the sense that there are systemic problems which needs to be fixed and the only way to do that is to come together and pool resources and influence," Gifford noted.

He pointed out investors "still have a long way to go" in ESG issues but shareholder interest in this topic has leapt over recent years.

"There was a convergence of a corporate governance movement combined with a range of environmental and social issues, but in climate change in particular, which created a perfect storm through which investors now realise ESG issues are not fringe and that they are  important to portfolio performance in the long term," he explained.

Gifford noted he was positive about the development as the PRI is "not being imposed from outside but emerging from within those who have the money entrusted to them by their beneficiaries".

If you have any comments you would like to add to this or any other story, contact Barbara Ottawa on +44 (0)20 7261 4618 or email barbara.ottawa@ipe.com

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