Collaborative engagements coordinated by the PRI

The PRI Secretariat, in consultation with signatories and the Investor Engagements Steering Committee, has developed a list of priority themes for in-depth collaborative engagements which the PRI will coordinate over 2012-2015. The PRI is currently using this evaluation framework to measure the impact of these engagements. These themes, organised by environmental, social and governance (ESG) category, can be found below.

Environment – managed by Paul Chandler

Water risks

Population growth, urbanisation and changing weather patterns are increasing water scarcity in many regions of the world, posing risks to companies in both the short and long term. This engagement focuses on improving management of water risks in companies’ agricultural supply chains. Global listed companies in the food, beverages and textiles sector, who are significant users of water, and are often reliant on agricultural inputs from water-scarce regions, are the targets of this project. More information for signatories.

Fracking

Fracking operations can have significant environmental and social impacts on water resources, greenhouse gas emissions, and local communities. Bans and moratoriums on fracking in several regions around the world have demonstrated that companies can face major risks to their license to operate and future earnings where they do not adequately manage these impacts. This project focuses on global energy companies, including exploration & production, and oilfield service companies, operating in existing and developing markets for fracking operations, such as North America, Europe, and China. More information for signatories.

Emissions reduction targets

In light of increasing regulations on carbon emissions, rising energy costs and public concerns about climate change in many parts of the world, institutional investors are assessing how their portfolio companies are responding to climate risks. Companies that are not demonstrating progress toward making cost-effective carbon emissions reductions face increased business and reputational risks in the future. Through this engagement, a group of 18 investors has sought dialogues with 24 companies with significant greenhouse gas emissions, that had not disclosed an emissions reduction target based on data from CDP’s Carbon Action initiative. This engagement will be continued and expanded to additional companies over 2014. 

Sustainable palm oil

The palm oil industry has faced significant challenges – including allegations of forest clearing and social injustice by plantation companies, and the low uptake of Certified Sustainable Palm Oil by palm oil purchasers. These difficulties have prevented the sector from adequately tackling its GHG emissions and its contribution to deforestation, and also pose reputational risks for palm oil producers and purchasers. Global investors have formed a working group which is pushing for improvements in company practices across the value chain, in order to support the development of a more sustainable palm oil industry. More information for signatories.

Social – managed by Felicitas Weber

Labour standards in the agricultural supply chain

Working conditions in agricultural supply chains have come under increased scrutiny following the attention received in the apparel and electronic sectors. Field versus factory working conditions are characterised by different ground rules, owing largely to the less formalised nature of agricultural employment – a characteristic which presents heightened social and long-term investment risks, such as child labour, forced labour, lack of worker benefits, and health and safety issues. The engagement seeks dialogue with food and beverage companies, including producers, processors and retailers. More information for signatories.

Employee relations

Recent studies support a correlation between strong human capital practices, such as investment in employee training, and future shareholder returns. This engagement prioritises dialogue with global retail companies on issues material to company productivity and financial performance, including employee retention and training, high-performance work systems, and employer-employee relations. More information for signatories.

Human rights in the extractive sector

This project intends to understand how human rights policies get implemented by global extractive companies in the context of specific business relationships such as joint ventures. The UN Guiding Principles on Business and Human Rights and the UN Global Compact/PRI Guidance on Responsible Business in High-Risk and Conflict-Affected Areas serve as key resources for dialogue with target companies. More information for signatories.

Governance – managed by Athanasia Karananou

Director nomination process

Over the last few years, there has been increased focus on corporate boards. There seems to be significant scope for improvement in how directors are nominated to the board, with the aim of ensuring boards work most effectively to protect and create long-term shareholder value. This initiative focuses on engaging with companies located in several markets to seek more disclosure, and improve overall effectiveness of the director nomination process. More information for signatories.

Anti-corruption

Bribery and corruption are incompatible with good corporate governance and are harmful to the creation of value. Investors expect companies to have robust programmes to manage financial, operational and reputational risks linked to corruption in their firm and supply chains, especially as legal enforcement of bribery and corruption continues to build globally, and as companies face increasing potential regulatory liabilities. A coalition of investors is engaging with companies across sectors and regions that face bribery and corruption risks, to better understand their ability to manage and reduce those risks, and their capacity to improve practices and transparency. More information for signatories.

Integrating environmental, social and governance (ESG) issues into executive pay

In 2012, a group of PRI signatories developed guidance to support dialogue between shareholders and investee companies on how to identify appropriate ESG metrics, link them meaningfully to executive pay, and provide sufficient disclosure to investors. Investors are now engaging, in the second phase of the project, with companies in the utilities and extractives industries to develop sector-specific supplements to the guidance. More information for signatories.

ESG disclosure – managed by Valeria Piani and Danielle Chesebrough

Integrated Reporting: IIRC Pilot Programme Investor Network

The International Integrated Reporting Council (IIRC) Pilot Programme is the ‘innovation-hub’ of the IIRC, where over 80 businesses and over 30 investors are helping to shape the future of corporate reporting through Integrated Reporting (IR). Providers of financial capital are the primary audience of Integrated Reporting in order to help inform their capital allocation decisions. The Pilot Programme Investor Network, run in collaboration with PRI, provides a platform for investors to shape the future of corporate reporting. More information for signatories.

Sustainable Stock Exchange Initiative

The SSE Initiative is a partnership between the UN and its affiliated organisations, stock exchanges and their regulators, investors, and companies. To address market-wide and systemic issues, this ongoing engagement will communicate the investor’s perspective on responsible investment, what constitutes a sustainable stock exchange and the overarching need for enhanced ESG disclosure. The overarching objective of the SSE Investor Working Group (SSE IWG) focuses on exchanges and their regulators enhancing listing rules and/or regulatory initiatives to require the disclosure of sustainability strategies among listed companies.  The PRI, UNCTAD, the UN Global Compact and UNEP-FI are the core organisers of the SSE Initiative supporting the work of exchanges to enhance sustainability among listed companies, with a strong focus on ESG disclosure. More information for signatories.

UN Global Compact Principles – managed by Danielle Chesebrough

Communication on Progress: Leaders and Laggards

Participating in the UN Global Compact and fully adhering to its reporting requirement signals that a company is aware that environmental, social and governance issues are increasingly relevant to long-term financial success. Every year since 2008, this engagement has asked non-reporting Global Compact companies to submit their Communication on Progress to regain active status, or, conversely, welcome advanced-level reporting. After the successful results of previous phases of the project, a new initiative focusing on leaders is now in place. More information for signatories.

ESG Investor Briefings 

The PRI and the UN Global Compact are collaborating on an initiative that seeks to improve communication of how environmental, social and governance (ESG) issues can create financial value. The project asks companies to host a 1-hour ESG Investor Briefing to an audience of investors on the PRI webinar platform using the project’s ESG Value Driver Framework. Through the Briefings, companies present the material ESG value drivers for their business to investors. Participation of the CFO and Head of Sustainability and Investor Relations is strongly encouraged as part of hosting a Briefing. More information for signatories.