Institutional investors managing US$ 2 trillion prioritise executive remuneration, climate change and labour standards for future company engagement activity

LONDON, 4 September 2012 – Institutional investors managing more than $2 trillion in assets have identified executive remuneration, climate change and supply chain labour standards as priority areas for engagement with companies in their portfolios over the coming year, according to a new survey by the United Nations-backed Principles of Responsible Investment Initiative (PRI). Respondents to the survey are active users of the PRI Clearinghouse facility, the world’s leading platform for investors to engage collaboratively with companies on their disclosure, management and performance on environmental, social and governance (ESG) issues.

“The PRI Clearinghouse supports some of the world’s leading asset owners and investment managers to be active owners of the assets in their portfolios, and they have signalled several areas they believe require greater attention by companies over the coming year,” said James Gifford, Executive Director of the PRI. “It is clear that a company’s management of ESG issues does play a role in its ability to deliver sustainable returns to its investors, and users of the Clearinghouse recognise that exercising the rights associated with ownership of the assets in their portfolio is a fundamental part of managing, protecting and enhancing the value of those assets for their clients and beneficiaries.”

The PRI Clearinghouse has hosted nearly 400 engagements on issues ranging from boardroom diversity and anti-corruption to carbon emission reduction projects and water risk. Signatories use the Clearinghouse to come together to engage with investee companies on ESG risks and opportunities, and encourage improved performance and disclosure.

The impetus behind the PRI Clearinghouse is that if investors are to effectively monitor companies within their portfolios, they need to work with other investors to pool their resources and influence. Shareholder engagement activities commonly undertaken through the Clearinghouse include conducting research on ESG issues of concern and then holding discussions with companies to address them. Engagements may include the filing of shareholder resolutions or sending signals to companies through voting at AGMs.

In the survey, users of the Clearinghouse were asked to identify the priority areas for future collaborative engagement to be coordinated by the PRI Secretariat over the next 3 years. The top five ESG issues selected are shown in the table below.

Top 5 issues selected by PRI Clearinghouse users

Top Issues

Environmental

Social

Governance

1

Climate change

(GHG emission reductions and energy efficiency)

Labour standards

(supply chain)

Executive remuneration (including linkages with sustainability)

2

Water

Human rights

Bribery and corruption

3

Unconventional fuels

(oil sands, fracking, deepwater drilling)

Local communities/indigenous population

Board-related issues

(including diversity)

4

Biodiversity and ecosystem services

(including agricultural commodities and fisheries)

Labour standards

(direct employees)

Political contributions and lobbying activities

5

Waste and pollution (excluding GHG emissions)

Health and safety

Vote confirmation

 

About the Principles for Responsible Investment

The United Nations-backed Principles for Responsible Investment Initiative (PRI) is a network of international investors working together to put the six Principles for Responsible Investment into practice. The Principles were devised by the investment community. They reflect the view that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios and therefore must be given appropriate consideration by investors if they are to fulfil their fiduciary (or equivalent) duty. The Principles provide a voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices and so better align their objectives with those of society at large.

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 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.

Contact:

Matthew McAdam
Head of Communications, PRI
T: +44 (0)20 7749 5141
comms@unpri.org

 

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