Collaborative engagements by PRI signatories
Engagement Clearinghouse
The PRI Engagement Clearinghouse, established in late 2006, provides signatories with a forum to share information about collaborative engagement activities they are conducting, or would like to conduct. It is the first of its kind in the world, and is an effective tool for stimulating collaboration among signatories. There are relatively few investors in the world with the power and legitimacy to influence individually corporate performance on ESG issues through the size of their own institutional shareholding alone. The primary objective of the Engagement Clearinghouse is to provide signatories with a collaborative forum that can transform one voice into the voice of many.
One of the difficulties that investors face is that the costs of monitoring corporate performance and engaging with companies are borne by those that conduct the engagement, while the benefits are shared by all shareholders of the company. And when engagement is conducted in a professional and systematic way, these costs can be significant. The PRI Engagement Clearinghouse is designed to help address this collective action problem. It is based around a private online forum for signatories to pool their resources and influence, and seek changes in company behaviour, policy or systematic conditions.
To use the PRI Engagement Clearinghouse, signatories develop a proposal for the engagement they would like to undertake, with details for how it would be conducted, expected outcomes, background information and any associated documents. Other signatories can see which activities are being proposed and/or have progressed, and then choose to participate, or simply use the Clearinghouse as a learning tool. The PRI Clearinghouse team actively supports and promotes the collaborative engagements proposed through the platform. Approximately one-third of in-depth collaborative engagements initiated on the Clearinghouse are also directly coordinated by the team.
Samples of ongoing or recent collaborative engagements by PRI signatories are below:
CEO Water Mandate
Around the world, population growth, urbanisation and climate change are combining to place significant pressure on water supplies for companies in all industries. According to the UN, nearly two-thirds of humanity is expected to live in water-stressed regions by 2025.
A US$ 1.5 trillion alliance of 16 signatories has asked 100 of the world’s biggest companies to join an initiative called the ‘CEO Water Mandate’, which will improve corporate policies and practices around water usage.
A letter sent to target companies from investors states it is companies that are best managing the risks and opportunities presented by limited global water availability that are more likely to be considered as viable long-term investments.
At the conclusion of this engagement in November 2010, 21 of the 100 companies targeted by this engagement have joined the CEO Water Mandate, which constitutes more than 29 per cent of the total number of companies endorsing the Mandate (72). Companies that joined due to this engagement include Nike, Cadbury, Carlsberg, and GlaxoSmithKline amongst others. In addition, 70 companies acknowledged signatories’ concerns, and 21 of these stated a willingness to further consider the request.
Emerging Markets Disclosure Project
Emerging Market Disclosure Project (EMDP), is an international initiative led by representatives from Boston Common Asset Management, Calvert Investments, Social Investment Forum (SIF) and the SIF International Working Group. The project started in 2008 with a goal to assess and improve corporate environmental, social and corporate governance (ESG) reporting in emerging markets. The group, which has benefited from technical advisory support from Principles for Responsible Investment, has conducted several baseline studies, engaged companies and won important victories on ESG reporting along the way.
More information
Engagement on UN Global Compact reporting
For the fourth year Aviva Investors is leading a collaborative engagement with participants of the UN Global Compact regarding their Communication on Progress (COP). Aviva Investors and 35 other PRI signatories representing US$ 2.6 trillion in assets under management sent a letter to the Chief Executives of listed Global Compact signatories, to either:
- welcome particularly good practice (89 companies), or,
- challenge non conforming companies to regain full participant status (54 companies).
Leading signatories have decided to make this an annual collaborative engagement that new PRI signatories are welcome to join each year. The recipient companies list in 2010 included 44 leaders and 86 laggards or non-conforming companies. Due to a moratorium for non-OECD/G20 companies enacted by the UN Global Compact in early 2010, the number of laggards targeted in this engagement was reduced to 67. As result, 40 per cent of companies regained active status as UN Global Compact participants.
Engagements with companies on Carbon Disclosure Project (CDP) data
PRI signatories have organised several collaborative engagements on CDP disclosure.
One type of engagement targets non-responding companies. Every year leading investors invite other PRI signatories to contact non-responding companies and encourage them to reply to the questionnaire.
In 2009, another engagement supported by 33 PRI investors has targeted 92 companies in energy-intensive sectors that did not disclose GHG emissions reduction plans or both Scope 1 & 2 emissions in their CDP 2009 response. According to the 2010 CDP result, 23 companies improved their disclosure because of investor concern. Investors have selected 32 laggard companies for more in-depth conversation in the months before the next CDP questionnaire is launched in 2011.
In 2010, another engagement joined by 14 investors focused on 204 companies with CDLI scores from CDP 2009 that were in the lowest quartile. Following the CDP 2010 results, the CDLI scores of companies that were targeted in this engagement were reviewed. 72 of the 204 target companies (36 per cent) were no longer included in the lowest quartile of CDLI scores in 2010. 61 of the companies improved their CDLI score by more than 15 points between 2009 and 2010. Disclosure remained poor at 127 of the companies. In this case the companies either-remained in the lowest quartile, responded late to CDP and were not scored, or did not publicly disclose their CDP response in 2010.
In March 2011, a new collaborative engagement with companies non-responding to the 2010 CDP Water questionnaire was been launched.
Investor statement calling for global arms trade agreement
In July 2011, 24 PRI signatories with over US$ 1.2 trillion in assets under management called for a strong, legally binding and comprehensive Arms Trade Treaty (ATT). This message comes as United Nation member states negotiate the ATT at the UN Headquarters in New York City.
This group has issued a statement highlighting the need for the establishment of common international standards on the transfer of conventional arms.
Signatories to the statement feel that the ATT is directly relevant to the long-term financial interests of investors as the irresponsible supply of conventional weapons can increase conflicts, thereby contributing to political instability, insecurity and lower economic growth, specifically in emerging economies.
Investors believe that member states have an historic opportunity to set out commonly-agreed rules for strict national regulation and international monitoring to fight corruption, and prevent arms export and transfers that may contribute to violations of international human rights and humanitarian law.
Investors view the ATT as a risk-reduction mechanism for arms producers to help prevent corporate complicity in human rights and humanitarian law violations. Without a stronger global conventional arms control system, there are clear regulatory and reputational risks for companies in the defence industry.
Some investors in this group have been in contact with the Chairman of the Arms Trade Treaty Preparatory Committee, Ambassador Roberto García Moritán, ahead of the latest negotiations, and have shared their perspective on the issue with him.
Investor statement in support of Professor John Ruggie’s Draft Guiding Principles
In January 2011, a number of investors participated in the consultation process for the Draft Guiding Principles with the UN Secretary General’s Special Representative on Business and Human Rights, Professor John Ruggie. Investors shared their experiences in the assessment of human rights-related risks facing business and provided suggestions for clarification on the Draft Guiding Principles to Professor Ruggie and his team.
Following this, in February 2011, 19 investors with a collective total of US$ 2 trillion assets under management signed the first investor statement in support of Professor Ruggie’s on-going work, specifically, the Protect, Respect, and Remedy Framework and the Draft Guiding Principles.
Today, 19 May 2011, in preparation for the UN Human Rights Council (UNHRC) session in early June 2011, where Professor Ruggie will formally present the Guiding Principles, 29 investors with a collective total of US$ 2.7 trillion assets under management released a second investor statement recommending the UNHRC to formally endorse the document.
Specifically, the statement expresses investors’ sentiment that Professor Ruggie’s work will be useful in the analysis of how companies address human rights risks and conveys that they seek to use, as a benchmark for performance, the Protect, Respect, and Remedy Framework and the Guiding Principles in engagement with companies.
The second statement was issued via investors’ respective websites and news feeds, and was published on the
Business & Human Rights Resource Centre and the UN Secretary General’s Special Representative
web portal.
Read the investor statement
Pilot project on responsible business in conflict-affected and high risk areas
Following the official launch of the 'Guidance on Responsible Business in Conflict-Affected and High-Risk Areas: A Resource for Companies & Investors' at the UN Global Compact Leaders Summit in June 2010 in New York, the UN Global Compact and PRI have entered the 'roll-out' phase of the Guidance aiming to promote its content and encourage its implementation by companies and investors operating in challenging environments.
In January 2011, the Global Compact and PRI embarked on the next phase to translate the Guidance into operational reality. In collaboration, they have launched two pilot groups, for companies and investors accordingly, to test the Guidance in their respective operational and engagement activities. Both groups meet separately every two months and convene joint quarterly conference calls to share best practices, challenges faced, and lessons learnt.
The investor pilot group, comprised of 11 investors, specifically seeks to develop a better understanding of how the Guidance can facilitate dialogue and establish agreed upon concrete actions with investee companies operating in conflict-affected and high-risk areas. Investors are currently testing the operational relevance of the Guidance points in their respective individual engagement activities and many are also partaking in trailing the Guidance via a collaborative engagement process.
Similarly, the company pilot group, consisting of approximately 15 companies, aims to develop a practical understanding of how the Guidance can best be used by companies in their daily operations in conflict-affected and high-risk areas, so that they may live up to their commitment to the Global Compact’s ten principles.
Over the course of 2011, various awareness raising activities about the Guidance, both at the global and local levels, will take place.
Sudan Engagement Group
The Sudan Engagement Group (SEG) is made up of 22 institutional investor signatories with approximately US$ 2.1 trillion total assets under management. These signatories recognise that their international investments include companies with operations in, or exposure to, Sudan – a country whose human rights record, weak governance, and history of violence is a subject of ongoing public and political concern.
More information
Sustainable stock exchanges
Sustainable Stock Exchanges is an initiative in partnership with Principles for Responsible Investment, United Nations Conference on Trade and Development, and UN Global Compact. It explores how stock exchanges can work together with investors, regulators and companies to enhance corporate transparency, and ultimately performance, on ESG (environmental, social and corporate governance) issues and encourage responsible long-term approaches to investment.
In January 2011, a group of 25 PRI investors sent letters to 30 global stock exchange CEOs and listing authorities asking them to support their call for improved ESG disclosure.
More specifically the investors are asking stock exchanges to consider the following:
- Encourage better internal corporate governance within companies, such as improving structure, independence and quality of boards of directors and disclosing how sustainability issues are addressed at the board level.
- Consult with companies on how they should be integrating sustainability into long-term strategic decision-making – e.g. highlighting risks and opportunities within the existing business model on their website and in their financial report. This includes encouraging companies to undertake integrated reporting.
- Distribute guidance for listed companies on material sustainability issues, global initiatives and other opportunities that encourage ESG disclosure.
- Consider mandating that listed companies have a non-binding shareholder vote on the sustainability report or sustainability strategy to be put to the AGM.
More information
For more information on these or any other collaborative shareholder engagements by PRI signatories, contact clearinghouse@unpri.org. PRI signatories can view more by logging onto the PRI extranet.
