UN PRI: Everything You Need to Know
What are the UN PRI ?
The United Nations Principles for Responsible Investment (UN PRI), launched in 2006, now have over 3,000 signatories with more than $100 trillion in assets under management. The PRI’s are a set of voluntary and aspirational principles that encourage ESG incorporation into investment practice, focused on asset owners, investment managers, and service providers. In 2021, as sustainability takes centre stage in the corporate world, key figures continue to make stronger calls for ESG integration into finance. BlackRock CEO Larry Fink’s annual letter to CEOs emphasizes that sustainability is now essential to long term financial success[1].
The PRI’s are a way of demonstrating that sustainability is given adequate attention in investment decision-making and asks signatories to agree to the following six principles:
We will incorporate ESG Issues into investment analysis and decision-making processes.
We will be active owners and incorporate ESG issues into our ownership policies and practices .
We will seek appropriate disclosure on ESG issues by the entities in which we invest.
We will promote acceptant and implementation of the Principles within the investment industry.
We will work together to enhance our effectiveness in implementing the Principles.
We will each report on our activities and progress towards implementing the Principles.
Through the UN PRI website, signatories submit annually on their progress regarding these six principles. Responses to all ‘core’ questions are publicly available and help stakeholders to assess investors ESG activities. Responses to the UN PRI have helped improve transparency, demonstrate best practice, and align signatories with growing demands for sustainability.
Why Become a Signatory?
Signing up the UN PRI shows stakeholders that sustainability and climate change are being taken seriously. As a signatory, a company is able to better showcase services and highlight successes, internally and externally. Furthermore, the UN PRI’s incorporation of Task Force on Climate-Related Disclosures’ (TCFD) recommendations means signatories are also aligned to TCFD, due to become mandatory in the UK by 2025. Most major players across industries are already signed up to the Principles, promoting the standardisation of reporting and industry-specific knowledge sharing.
The UN PRI have a powerful mission statement to which signatories align when they sign up:
“We believe that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole.”
By ensuring that organisations invest responsibly and create long-term value, the Principles can help benefit the societies and environments where organisations operate, and also assures stakeholders that ESG is being sufficiently incorporated into investment decisions.
How it works?
Applying to become a UN PRI signatory is a straight forward 3-step process. First, gather the documents required including a declaration from the CEO or C-suite individual and complete an organisational chart explaining the companies structure. Then, a 15 minute online application needs to be filled out giving basic company information. Finally, the fee must be paid covering the period until 1st April when the next fee year starts.
As a signatory, companies complete an annual assessment between January to March. This assessment includes 3 compulsory modules as well as up to 7 business specific modules that are unlocked dependent on an organisations specific investment areas. There is also an optional ‘Sustainability Outcomes’ module that is voluntary but gives organisations the opportunity to show off where they’re carrying out best practice.
Fees are based on AUM and can be found on the UN PRI website.
Key changes to 2020 processes
For the 2021 assessment, the scoring methodology has been recalibrated to make assessment more challenging. This means that the assessment will become more consistent between modules to reflect the current state of the responsible investment market, and to showcase the range of responsible investment practices in the industry.
Scores will continue to be confidential and be provided per module or asset class, with no overall organisation score given. Module scores will move from band scoring (A+ to E) to a new numerical system based on 1-5 stars. This change is to reflect that scores for the 2021 reporting cycle cannot be compared to previous years. A score of 1 star indicates little or no ESG whilst a score of 5 stars indicates industry leading practices.
Deadlines
The deadline for submission is the 29th April 2021.
How we can help
Orbis Advisory work across a broad range of sectors to develop and support ESG strategies to meet investor demands, prepare for upcoming legislative changes, and create tangible benefits both now and in the future. Please see our website to explore our full range of services, or send an email to info@orbisadvisory.com for any inquiries.
