The UN-supported PRI aims to bring responsible investors together to work towards sustainable markets that contribute to a more prosperous world for all. Signatories sign on to the six principles and to annual mandatory reporting to the PRI on their responsible investment activities. As a result, the evolving Reporting Framework houses a unique and incredibly powerful database of standardized (i.e. comparable) responsible investment data. This data has been directly reported since 2012 by thousands of investors around the globe covering every asset class. In analysing this data, we are able to identify market trends, best practices and pain points, and we can cut this data in a number of ways to gain powerful insights into various factors. In an effort to enhance transparency in sustainable markets, the PRI shares these insights via an incredibly data-rich set of dynamic “snapshot reports” which are publicly available:
Overview: Map of AUM Distribution by Asset Class
*See links to more snapshot report below
Redesigning the Reporting Framework
To mark the PRI’s 10-year anniversary in 2016, we undertook a series of initiatives to review progress and create an ambitious and achievable vision for how the PRI and the wider responsible investment community should progress over the next 10 years. These activities culminated in the launch of “A Blueprint For Responsible Investment” (“the Blueprint”) in 2017, setting the direction of our work for the 10 years ahead. The overarching aim in the Blueprint is to bring responsible investors together to work towards sustainable markets that contribute to a more prosperous world for all. This aim is underpinned by 9 priority areas, one of them being “Driving Meaningful Data”. One of the deliverables of Driving Meaningful Data was around the redesign of our reporting framework to include Sustainable Development Goal (SDG) Outcomes.
The 2020 Reporting Framework, while comprehensive, focuses primarily on the processes in place to implement responsible investment policies and activities. The PRI’s long-term goal is to develop the Reporting Framework to allow us to better measure the contribution that responsible investment has to tangible ESG improvements. We decided it was time to overhaul and redesign the entire framework. The aim of the redesign was both to ensure PRI’s reporting and assessment has clear objectives of how it will contribute to driving change in the investment industry and to ensure that it remains relevant to evolving responsible investment practices.
An example of a significant changes is the introduction of the ‘core’ and ‘plus’ model. It clarifies and builds on the previous Reporting Framework of having mandatory and voluntary indicators, grouped into two main components:
Additional improvements to the Reporting Framework included making it shorter and more concise. For example, many indicators that repeated within asset class modules were pulled out and added to the overarching modules. We have also made the new framework more detailed. Signatories will be asked not simply about what their policies and activities are, but also about the breadth of the assets under management coverage and the depth of their activities. For example, how ESG information is used in investment making decisions, monitoring and escalation is much more of a focus. To learn more about the redesign click here or to have a look at the new detailed reporting questions click here.
An Example of Canadian Reporting Data Insights
Upon analysing some of the Canadian signatory data, the signatory relations team has identified fixed income as an area of opportunity for 2021. Fixed income is the most commonly reported on module among Canadian signatories yet it scores the most poorly on average. Responsible investing policies and procedures specific to fixed income are not commonplace in Canada and many other markets, though there is a clear trend towards addressing this and though the scores are low they are improving. For example, in 2020 Canadian signatory reporting, 14% of direct fixed income (internally managed) reporting modules received a score of zero (or a grade of E).**
For context, globally 13% of direct fixed income modules received a score of zero and in the UK alone that figure was halved at 6.5%. These scores are from 2020, the new Reporting Framework which is open now for the 2021 reporting season, is more in depth. For example, previously signatories were asked if they incorporated ESG into their fixed income investment activities whereas in the new Reporting Framework, they will have to disclose the breadth of assets under management covered by these activities as well as the extent to which they are implemented.
Percentage of ‘E’ Scoring Directly Managed Modules
Percentage of ‘E’ Scoring Externally Managed Modules
In an effort to accelerate progress within the Canadian investment industry, the PRI hosted (and recorded) a webinar to review some of the great work our own fixed income team has been doing, review best practices and leadership within the Canadian PRI signatory base and discuss what fixed income reporting looks like in the new Reporting Framework. We look forward to continuing our collaborative efforts as ESG remains an increasingly central issue to Canadian investors.
Snapshot Report – Assessment scores analysis (2014-2019)
Snapshot report 2020 – Climate change
Snapshot Report 2020 – Publicly available responsible investment policies
PRI Direct Fixed Income Snapshot