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Market News

 May 26, 2007
$8T backs Responsible Investment Principles

 New York, USA (GLOBE-Net) - Just over one year ago, the United Nations launched its Principles for Responsible Investment (PRI), a set of guidelines promoting the integration of environmental, social and governance factors into the global financial marketplace. Today, the Principles have been endorsed by 183 institutional investors around the world, representing more than US$ 8 trillion in assets under management.

At the initial launch on April 27, 2006 at the New York Stock Exchange, 20 'mainstream' institutional asset owners representing US$ 2 trillion signed up. The organizations behind the PRI, the United Nations Environment Program Finance Initiative and the UN Global Compact, have since worked hard to engage more investors.

During the first four months of 2007 more than 40 investors signed up, including AP1, AGF Asset Management, JPMorgan Asset Management, HSBC Investments and Scottish Widows Investment Management.

Canadian asset owner signatories are the Canada Pension Plan Investment Board and Québec pensions funds Caisse de dépôt et placement du Québec and Comité syndical national de retraite Bâtirente. Canadian investment managers endorsing the Principles are: BC Investment Management Corporation; Growthworks Capital; Inhance Investment Management; Meritas Financial; and The Ethical Funds Company.

"In the first year, we have focused on spreading the word, signing up investors and putting in place the nuts and bolts to support signatories in implementing the Principles, including development of a robust process to monitor progress," said Donald MacDonald, Chair of the PRI and a Trustee of the British Telecom Pension Scheme. "We have great buy-in from the investment community, and we now have in place the support structures to assist in implementation. So year two is about action."

A key result of the endorsement by institutional investors and investment managers has been the development of tools and resources to incorporate environmental, social and governance (ESG) analysis into investment decisions.

A global collaborative forum, the PRI Engagement Clearinghouse, was also a success in providing a forum for investors to work together and share knowledge and resources to take action on ESG issues, says the PRI Secretariat.

The first PRI Reporting and Assessment questionnaire has just been completed by signatories and the results will be released in July. The results should provide some key information about the state of ESG analysis and implementation of the Principles by leading institutional investors, while ensuring that signatories are following through on their commitment.

Another interesting result of the Principles is the greater transparency among investors on how they address ESG issues. For example, Insight Investment is the first signatory to release a dedicated PRI report, outlining the fund's approach to implementation.

The Principles

The six Principles, backed by 35 specific action suggestions, require signatories to:

  1. Incorporate ESG issues into investment analysis and decision-making processes.

  2. Be active owners and incorporate ESG issues into their ownership policies and practices.

  3. Seek appropriate disclosure on ESG issues by the entities in which they invest.

  4. Promote acceptance and implementation of the Principles within the investment industry.

  5. Work together to enhance their effectiveness in implementing the Principles.

  6. Report on their activities and progress towards implementing the Principles.

The voluntary guidelines reflect a growing recognition among investors that environmental, social and governance (ESG) factors are materially important to long term financial returns. Institutional investors, particularly pension funds, are now seeking comprehensive information on corporate activities, beyond traditional financial reporting.

Read more on the Principles and the Action Suggestions on the UN PRI website.