Engaging companies on ESG issues improves their sustainability, their management and their risk/return profiles
Over two-thirds (70%) of signatories have a stewardship component in their responsible investment policy and implement organisational measures to ensure it is executed effectively across their listed equity holdings.
Climate Action 100+
Climate Action 100+ is one of the world’s largest investor‐led engagement initiatives, with more than 545 global investor signatories across 32 markets, representing more than US$52 trillion in assets under management. It aims to ensure that the largest corporate greenhouse gas emitters take necessary action on climate change, targeting 160 companies to date.
The PRI is one of five investor networks leading the initiative’s engagement work. Alongside chairing the multi-region working group, PRI CEO Fiona Reynolds sits on the global steering committee governing Climate Action 100+.
This year, Climate Action 100+ issued its first net-zero company benchmark, defining how businesses should align with a net-zero emissions future and the Paris Agreement goals and assessing in detail the climate commitments that companies have made. It also sets clear engagement priorities for the initiative to drive faster corporate climate action.
The initiative also published its first sector strategy, focused on aviation, providing investor expectations to guide engagements with aviation companies and help them align with its goals.
It added nine companies to its focus list in 2020:
Papua New Guinea
Petróleos Mexicanos (PEMEX)
Saudi Arabian Oil Company (Aramco)
Read more about the work of Climate Action 100+ here.
Making voting count
Following on from our broader work on Active Ownership 2.0 – our framework for more effective and ambitious stewardship – we published Making voting count: Principle-based voting on shareholder resolutions, which sets out how investors can develop and apply high-level principles to govern their use of voting on shareholder resolutions.
It outlines what voting principles are, why they are needed, how they can align with Active Ownership 2.0 and how they should be applied.
Acting in concert
We published guidance for investors, together with Norton Rose Fulbright, to address the perception that regulatory barriers in Germany prevent institutional investors from engaging collaboratively there.
Involving several law firms, this work provides an overview of local regulations and legal opinions on whether certain behaviours would be considered acting in concert and trigger regulatory requirements. We plan to publish guidance on the US market next year, alongside a summary document that will provide practical advice on how signatories can implement the findings.
The guidance on Germany follows similar work in the UK and South Africa. All are available to view here.
In the past year we have completed two of our coordinated engagements (on oil and gas companies’ approach to the climate transition and on responsible sourcing of cobalt) and continued work on two ongoing engagements (on climate action – see Climate Action 100+ and sustainable commodities – the second phase of this engagement will commence in 2021/22).
In the next year we will also launch an engagement focused on human rights issues, as part of our broader strategic focus on this area (see Enable real-world impact section.)
Two engagements closed in 2020/2021
Climate oil and gas transition
15 companies have committed to an absolute or relative target for scope 1 and 2 emissions vs 10 in 2018
Between March 2018 and October 2020, the PRI coordinated a collaborative engagement on climate change transition for the oil and gas sector, designed to complement and reinforce the goals of Climate Action 100+. More than 50 institutional investors, representing approximately US$3 trillion, engaged with 25 oil and gas companies.
It aimed to explore how companies are assessing their climate-related transition risk exposure; ensure that they are planning appropriate responses to policy and technological shifts that may limit their ability to exploit assets; better understand how they are evaluating future capital expenditure and production, and encourage improved disclosure aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
Responsible sourcing of cobalt
Between 2018 and 2020, we coordinated a collaborative engagement on responsible cobalt sourcing with companies in the electronics and automotive sectors. A total of 46 institutional investors, representing approximately US$6.4 trillion in assets under management, engaged with 16 companies on their cobalt sourcing practices. The objective was to improve companies’ performance and impact in three focus areas:
- human rights risk assessment and comprehensive due diligence efforts;
- impact monitoring and corrective action, including on-the-ground remediation; and
- collaboration on systemic issues.
This year we produced engagement guidance on whistleblowing and sovereign debt.
We published an engagement guide on how investors can assess and engage with investee companies and use their influence as stewards of capital to improve outcomes around corporate whistleblowing practice. It explains why this topic is relevant for investors, highlights potential focus areas, and provides a set of disclosure expectations and practical questions that investors can ask investee companies.
Our engagement guide on sovereign debt highlights market practices, challenges and how existing communication channels and opportunities can be leveraged to stimulate conversations around ESG topics through a multi-pronged process that can be mutually beneficial for sovereign debt issuers and investors.
- In 2020/21 there were 326 collaborations posted to the platform (108 excluding shareholder resolutions); compared to 229 (136) in 2019/20.
The Collaboration Platform allows signatories to collaborate on PRI-coordinated initiatives, propose initiatives themselves and support those proposed by peers, pool resources, share information and enhance their ESG influence.
This year we launched a publicly accessible database allowing investors and other stakeholders to find upcoming ESG-related shareholder resolutions and track the results of key proposals that have been voted on.
We also upgraded and integrated a vote declaration tool, which aims to increase transparency and collaboration across the industry (in line with Principles two and six). It helps investors to share their voting intentions, demonstrating to peers how they undertake their responsible investment activities through voting on shareholder resolutions and allows asset owners to monitor the voting activities of their investment managers.
 This question, introduced in the new Reporting Framework, is similar to the 2018/2019/2020 question asking whether signatories set objectives for the majority of their individual or collaborative engagements, but not directly comparable.
 Soy-linked deforestation and sustainable palm oil were previously two separate engagements – these are being merged into one working group. We expect to publish the outcome of these engagements in the coming months.