The Principles for Responsible Investment (PRI), a UN-supported network of investors working to promote responsible investment (RI), has made extensive changes to its transparency report framework.
The principles were launched in 2006, and the PRI has now revamped the requirements for the upcoming 2021 reporting cycle. The difference between this new reporting framework and previous ones is that there will be less questions for investors, but the questions will be tougher. The idea is to make it more challenging to get higher ratings and continue pushing the needle for responsible investment.
What’s new for PRI signatories?
The annual transparency report has been updated with the following three new modules:
- Senior Leadership Statement (SLS)
An opening statement (signed by a CEO, CIO or senior member of the organization’s leadership) which will allow signatories to frame their approach and provide an overview of what they have achieved in terms of RI.
- The Investment and Stewardship Policy (ISP)
This captures the signatory’s global approach to RI and includes key indicators that are applicable to most asset classes. Building on last year’s Strategy and Governance module, this new module evaluates the strength of RI incorporation processes.
- Manager Selection, Appointment and Monitoring (MSAM)
Only mandatory for signatories with either 10% of their AUM (or US$10 billion or more) in an externally managed asset class in the relevant reporting year.
These new modules come in addition to the already existing Organisational Overview (OO) module and the Asset Specific modules. The new framework functions on a binary system with “core” questions being mandatory and “plus” questions voluntary and unassessed. This allows signatories to further elaborate on their RI strategies and distinguish themselves from other signatories by displaying more advanced practices that might not be as widely adopted throughout the industry.
Minimum requirements for investor membership (implemented in 2018) will be strengthened. For now, the minimum requirements are still the same as in previous reporting cycles, but the new requirements will likely increase current requirements as well as adding new ones. The PRI is looking to implement these changes for the 2022 reporting cycle in order to further increase accountability. It is also planning a transition period that will allow signatories enough time to implement them.
Why does the reporting need to be updated?
One of the PRI’s main goals is to create a stakeholder network founded on the idea of creating a collective understanding of investors’ real-world and industry impacts. So, by updating its reporting framework, the PRI not only ensures a more thorough reporting scheme, but also reaffirms its position as a leader in RI reporting. The PRI allows investors to capitalize on their responsible investing as the PRI score provides legitimacy, both in ethical implications and in its capacity to remain competitive in the broader context of industry trends.
At KPMG Luxembourg, we have a dedicated sustainable finance team specializing in sustainability disclosure. By providing assistance to PRI signatories in completing the PRI transparency report process, we facilitate RI-related achievements and goals. Get in touch!
This article has been written by Armand De Vaugelas together with Tom Hartmann.