Principles for Responsible Investment Best Practices Explained

The Principles for Responsible Investment (PRI) are a set of guidelines that help investors integrate environmental, social, and governance (ESG) factors into their investment decisions.

Investors can use these principles to improve their investment performance while also contributing to a more sustainable economy.

The PRI has six core principles that provide a framework for responsible investment.

These principles are voluntary and apply to all types of investors, including institutional investors, asset managers, and investment advisors.

The UN Principles for Responsible Investment (PRI) are a set of six core principles that guide investors in making informed decisions that consider environmental, social, and governance (ESG) factors. These principles are designed to promote responsible investment practices and support the integration of ESG considerations into investment decisions.

The six principles are as follows:

The PRI has a significant impact, with over $121 trillion in assets under management from signatory organizations, including prominent founding signatories like the Norwegian Government Pension Fund and the California Public Employees' Retirement System (CalPERS).

The UN Principles for Responsible Investment (PRI) are a game-changer in the investment world, and understanding their core philosophy is key to grasping their impact.

The PRI's core philosophy is that environmental and social considerations should be relevant factors in investment decision-making, not just an afterthought.

Historically, many investors have viewed environmental and social impacts as negative externalities that can be ignored, but the PRI is working to combat this attitude.

The PRI's six core principles are the foundation of their approach, and they're pretty straightforward.

Here are the six principles:

These principles have been adopted by organizations responsible for over $121 trillion in assets under management, including some big names like the Norwegian Government Pension Fund and the California Public Employees' Retirement System.

Active ownership is a crucial aspect of responsible investing. It involves participation and engagement in ESG-related activities, decision making, policy and standard setting, and voting. Investors should engage in dialogue with companies and investors on ESG matters, making these issues relevant in spaces for discussion and engagement.

Active ownership requires investors to be responsible sustainability practitioners. This means they must strengthen sustainability through their actions and decisions. Investors can achieve this by incorporating ESG issues into their ownership policies and practices.

The PRI's Principle 2 emphasizes the importance of active ownership. By adopting this principle, investors can help companies improve their sustainability performance. This, in turn, contributes to the overall goal of sustainable development.

Here are some key actions investors can take to practice active ownership:

By taking these actions, investors can demonstrate their commitment to responsible investing and contribute to a more sustainable future.

Investors need to set a standard for sustainability reporting to make informed decisions. They can adopt a global reporting standard such as the GRI or the ISSB.

Accurate reporting requires the participation and compliance of their investment portfolio companies. Transparency is essential when practicing sustainability.

Investors can ask companies to include ESG factors into financial reports. This will help strengthen the adoption of ESG into their investments.

To further accelerate progress and global standardization on sustainability reporting, investors can seek information on their plans to adopt global norms and codes of conduct aligned with sustainable development.

Promoting responsible investment requires a collective effort among investors. By integrating the principles into proposals, mandates, and procedures, investors can create a sustainable financial ecosystem.

To apply the fourth principle, investors can communicate and set ESG expectations with service providers, reworking their relationship if expectations are not met. This leads to a global transformation within the industry.

Responsible investing becomes a standard when investors work together, share practices and resources, and engage in dialogue to address concerns. This collective effort can steer rapid change into current practices, continuously improving towards sustainable development.

Working together is key to implementing the principles of responsible investment. Principle 5 of the Six Principles for Responsible Investment emphasizes the importance of collaboration among investors to enhance effectiveness in implementing these principles.

Investors can work together by connecting with each other and sharing practices and resources. This can help develop new standards and systems geared towards sustainability. By engaging in dialogue and addressing concerns within the industry, investors can steer rapid change into current practices.

BlackRock's 2020 Highlights demonstrate the effectiveness of working together. They earned an A+ Strategy & Governance score, reflecting the strength of their overall sustainable investing and ESG integration programs.

Here is a summary of BlackRock's 2020 scores compared to the median for large asset managers:

By working together and sharing best practices, investors can enhance their effectiveness in implementing the principles of responsible investment.

The PRI Academy's courses are highly recommended by industry professionals who value their comprehensive e-learning format and useful hypothetical scenarios and case studies.

Clinton Pang, a Senior Manager at PwC, praises the PRI Academy's courses for providing the fundamentals needed to integrate ESG in investments, regardless of location.

Giovanni Barbi, VP of Investment Stewardship at BlackRock, agrees that the courses provide the fundamentals for integrating ESG in investments.

Ben Ridley, Director at Credit Suisse, recommends the course to anyone wanting to learn the essentials of ESG and RI, citing its self-learning schedule as a convenient feature.

The PRI Academy course is a great tool to capture the basics of responsible investments, as Maria Nordqvist, Head of Responsible Investments at Lannebo Fonder, points out.

These testimonials demonstrate the value and effectiveness of the PRI Academy's courses in promoting responsible investment practices.