Principles for Responsible Investment

The UN Principles for Responsible Investment (PRI) is an investor initiative that was founded in 2005 in cooperation with the Finance Initiative of the UN Environment Programme (UNEP FI) and the UN Global Compact. The aim is to support investors in taking ESG factors into account when making investment decisions. To this end, the initiative has developed six principles for responsible investing.

The initiative relies on voluntary disclosures by participating members.

In 2021 the initiative had more than 3,800 signatories.

Who is in scope?

All signatories who participate in the initiative.

How do investors have to consider sustainability in general?

The six key principles encourage signatories to:

1. Incorporate ESG issues into their investment analysis and decision-making processes;

2. Be active owners and incorporate ESG issues into their ownership policies and practices;

3. Seek appropriate disclosure on ESG issues by the entities in which they invest;

4. Promote acceptance and implementation of the Principles within the investment industry;

5. Work together to enhance their effectiveness in implementing the Principles; and,

6. Report on their activities and progress towards implementation.

On which sustainability topics do investors have to report?

UN PRI signatories are obliged to report on their responsible investment activities annually between January and March. New signatories are not obliged to report in their first year.

The reporting follows a Core and Plus-model. There are only a few select ‘core’ indicators on outcomes that have to be provided. The majority of the outcomes-related content regarding ‘Sustainability Outcomes’ is voluntary to report on.

The specific modules to report on include:

• Organisation Overview;

• Investment and Stewardship Policy;

• (Manager) Selection, Appointment and Monitoring;

• Asset-specific modules (including Fixed income, Private equity, Real estate and Infrastructure). The private equity module is mandatory to complete for signatories who have either 10% of their AUM, or US$ 10 billion or more, directly invested in private equity in the reporting year.

For example, in the Organisational Overview module, signatories have to give notice if they incorporate ESG issues into their investment decision-making for the assets they hold.

Does the initiative define specific sustainability indicators?

Within the modules mentioned above, various categories are assessed, such as:

• ESG incorporation practices for all assets;

• ESG issues in strategic asset allocation;

• Allocation of assets to environmental and social themed areas;

• ESG incorporation strategies;

• Reasoning for interaction on ESG issues; and,

• Types of ESG information considered in investment selection.

The Private Equity module includes:

• A focus on capturing how an organisation’s responsible investment policy covers ESG factors for its private equity investments

• Specific questions on the depth of a signatory’s due diligence process and the identification of material ESG factors for each investment during the pre-investment phase

• More focused questions on:

  • how ESG factors are considered when monitoring the primary ESG KPIs for each portfolio company; and

  • how the management of ESG factors is used to create value during the investment holding period, indicating the proportion of private equity investments.

• An indicator on ESG-related information shared during the exit process to potential buyers of private equity investments.

• ‘Plus’ questions to outline best practice or innovative examples for ESG incorporation in the monitoring of private equity investments.