Principles for Responsible Investment
UNEP FI is a global partnership between UNEP (United Nations Environment Programme) and the financial sector. Over 180 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance.
Islamic Financial Institutions are not yet listed as a signatory of the rules.
About the PRI
The PRI is based on the notion that ESG issues, such as climate change or human rights, can affect the performance of investment portfolios and should therefore be considered alongside more traditional financial factors if investors are to properly fulfil their fiduciary duty [1].
The six ‘Principles for Responsible Investment’ provide a global framework for mainstream investors to consider these ESG issues. The PRI Initiative has also been created alongside the Principles to help put the framework into practice.
Over 650 investment institutions have signed up to the Principles, with an increased sign up arising from the global financial crisis of 2008/09, according to a report in the Financial Times.
The Principles are ‘voluntary and aspirational’ and they do not have minimum entry requirements or absolute performance standards for responsible investment. However, signatories have an obligation to report on the extent to which they implement the Principles. In 2009, five signatories were delisted for not fulfilling this obligation.
The PRI Initiative has a Secretariat of around 25 staff based mostly in London, with staff also based at UN Headquarters in New York, as well regional offices in Seoul, Sao Paulo, Amsterdam and Cape Town.
The Principles
The Principles as listed on the official website are as follows:
As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following:
1. We will incorporate ESG issues into investment analysis and decision-making processes.
2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4. We will promote acceptance and implementation of the Principles within the investment industry.
5. We will work together to enhance our effectiveness in implementing the Principles.
6. We will each report on our activities and progress towards implementing the Principles.
