PRI policy consultation responses, briefings and letters 2019

China

December

ESG Disclosure in China - Key considerations on policy design

This briefing provides technical guidance as part of the PRI’s work on ESG disclosure in China. It is based on the research and recommendations of the report ESG Data in China: Recommendations on Primary ESG indicators.

Download briefing in English / in Chinese

Global

September

Taking stock: Sustainable finance policy engagement and policy influence

Over the past five years, there has been a dramatic increase in the attention paid by financial policymakers to sustainability issues. Accompanying, and in some markets, leading this change, institutional investors have actively engaged with these policymakers on sustainability issues. The PRI monitors global sustainable finance policy. This white paper provides an overview of recent developments and presents five key findings.

See full briefing.

EU

August 

EU Regulation on EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks

This Regulation establishes a voluntary label for EU Climate Transition benchmarks and EU Paris-aligned benchmarks and lays down transparency rules for benchmark administrators with regard to the integration of ESG factors in their methodology. This briefing explains its implications.

See full briefing.

US

June 

US SEC New Conduct Rules

The US Securities and Exchange Commission finalized new rules for the conduct for investment professionals. The PRI believes all who provide investment advice owe their clients a fiduciary duty, which includes integration of material ESG factors.

See full briefing 

Poland

January

Sustainable finance in Poland: The state of play and prospects for progress

This briefing maps the market structures that are hampering or supporting ESG integration in Poland. It will support further discussions about ongoing EU action as well as introduce the topic in a more structured and comprehensive manner to the public and financial sector representatives.

See full briefing

Signatory sign on letter: SEC's proposed changes to shareholder proposals and proxy advisory firms

The PRI and the undersigned signatories oppose the proposed changes to Rule 14a-8 and proxy voting advice. The PRI encourages signatories to sign on through the collaboration platform. This letter will remain open through January 31st, 2020.

See full letter

US November Securities and Exchange Commission | Comment on proposed changes to Regulation S-K items 101, 103 and 105

The PRI is concerned that many of the proposed changes are not beneficial to investors, particularly on the issue of materiality, the shift in multiple disclosure items to a principles-based approach, and the failure to address investors’ demand for enhanced climate risk disclosure.

Read the letter

The Pensions Regulator | Future of Trusteeship and Governance

ESG issues are likely to have an increasingly material effect on returns in the coming years, and policies and regulations relating to these issues are rapidly growing. TPR needs to prepare trustees for this shift by, in particular:

• Setting minimum levels of knowledge and training for trustees on ESG issues
• Ensuring trustees of relevant schemes are informed of processes around winding up to encourage consolidation

See full response

The Pensions Regulator | Draft guidance consultation in response to CMA recommendations

To improve investment consultation service provision on ESG-related issues, the PRI recommends the guidance includes:

• Case studies on common challenges trustees face on ESG
• Sample objectives that more proactive pension funds may set for their consultants on ESG

See full response

Treasury Select Committee | Decarbonisation of the UK economy and green finance

Following oral testimony before the Treasury Committee, the PRI has provided written evidence on the policies needed to achieve net zero emissions in the UK. The PRI’s recommendations include:

• A more joined-up approach to developing climate policy across government
• De-risking low-carbon investments by scaling up available finance in infrastructure and tech innovation funds
• Provide a clear and stable direction regarding future carbon policy, such as clarity on carbon pricing beyond 2021 and a net zero national capital raising plan

See full response

House Financial Services Committee

The PRI commends the Subcommittee for calling this hearing to consider legislative approaches to require issuer disclosure of ESG data. Investors need access to consistent, comparable disclosure of material ESG data to make informed investment decisions.

See full response

Securities and Exchange Commission

The PRI urges the Commission to promote long-term investing by ensuring investors have access to the information and tools necessary to incorporate material ESG factors into investment decisions. Short-termism in today’s markets leads to a series of negative externalities including market volatility and inefficiencies in capital allocation.

See full response

Hong Kong Stock Exchange | Consultation on the review of the ESG disclosure reporting guide and related rules

PRI recommends that material ESG information is published in the annual report and reported alongside financial indicators; ESG disclosure is placed under oversight by the board; the board sets quantified and dated ESG targets; that primary ESG metrics are required. In addition, we recommend industry-specific and forward looking disclosures aligned with the TCFD framework.

See full response

Financial Conduct Authority (FCA)

The PRI recommends that the FCA regulate Independent Governance Committees (IGCs) directly and require providers, rather than IGCs, to be the primary source of reporting for scheme beneficiaries.

See full letter

Financial Conduct Authority (FCA) | Consultation on extending the remit of Independent Governance Committees

The PRI welcomes extending the remit of IGCs to include material ESG factors, stewardship and integration of member views.

The PRI recommends that the FCA produce guidance to improve the quality of reporting for beneficiaries of contract-based schemes, and places a stronger imperative on providers to integrate member views.

See full response

Financial Conduct Authority (FCA) and Financial Reporting Council (FRC) | Discussion paper on Building a regulatory framework for effective stewardship

In light of regulatory changes proposed to encourage greater stewardship in the UK, the FCA and FRC jointly published a discussion paper on what further barriers to effective stewardship remain and how they might be overcome. The PRI recommends:

• maintaining the proposed definition of stewardship, which reflects corresponding duties in the UK and beyond and emerging practices among some investors; and
• featuring the outcomes achieved by stewardship activities more prominently in the proposed “key attributes”.

Proxy advisors and investors work together to address market actors’ concerns and strengthen their contribution to an effective stewardship culture.

See full response

Superintendencia Financiera de Colombia |  Comment on Technical Document of Good Practices

The PRI recommends that AFPs clarify that FCPs should incorporate ESG issues consistent with the time frame of the beneficiary, and that the ESG preferences of beneficiaries should be understood and incorporated. The PRI recommends that the Superintendencia Financiera de Colombia, and AFPs, refer to the PRI’s Limited Partners’ Responsible Investment Due Diligence Questionnaire (DDQ) as a starting point for engaging FCPs. 

See full response

Department for Work and Pensions (DWP) | Consultation on Investment Innovation and Future Consolidation

In February, the DWP opened a consultation to support greater pension fund investment in illiquid assets, and recommends that smaller direct contribution schemes consider consolidation. The PRI welcomes the consultation and recommends expanding the reporting scope for consolidation to include larger schemes.

See full response

Financial Reporting Council (FRC) | Consultation on a revised Stewardship Code

In January, the FRC proposed substantial revisions to the UK Stewardship Code, in its first update since 2012. The PRI strongly welcomes many of the proposed changes, particularly the explicit recognition of the importance of ESG considerations and the introduction of an annual reporting requirement. The PRI’s priority recommendations are:

• The Code places a greater emphasis on the outcomes of stewardship activities.
• The guidance should provide best practice examples of stewardship of other asset classes and be updated regularly.
• Service providers’ responsibility to provide ESG-related services to clients should be explicitly recognised.
• The FRC should avoid duplication between the reporting framework of the Stewardship Code and internationally-used frameworks.

See full response 

Financial Conduct Authority (FCA) | Consultation on the implementation of the revised Shareholder Rights Directive

The PRI welcomes the regulatory baseline that the implemented Directive will introduce for disclosure of active ownership activities. The PRI recommends strengthening this baseline by requiring disclosure on a mandatory rather than comply or explain basis.

See full response

IOSCO consultation report on sustainable finance in emerging markets and the role of securities regulators 

This report and its recommendations will support securities regulators in promoting the development of responsible investment practices in  emerging markets. The PRI recommends that securities regulators introduce mandatory ESG disclosures, aligned with international standards and existing best practice, including explicit reference to TCFD implementation and reporting.

See full response

IOPS consultation on draft supervisory guidelines on the integration of ESG factors in the investment and risk management of pension funds

The draft guidelines will support pension fund supervisory authorities incorporate ESG requirements in investment regulations.
The PRI recommends that IOPS clarifies the definition of ESG integration in the guidelines and proposes that pension fund supervisors introduce regulations on ESG disclosures by pension funds and their asset managers.

See full response

European Securities and Markets Authority (ESMA) | Consultation on Disclosure Requirement applicable to Credit Ratings

The PRI welcomes the Guidelines on Disclosure Requirements Applicable to Credit Ratings as a significant step forward in transparency, by encouraging better signposting of how ESG factors may contribute to a credit rating opinion, rating outlook or related action.

The PRI recommends that ESMA amends its guidelines to better reflect that:

• ESG Disclosure should stress how ESG factors contributed to the improvement or the deterioration of the credit quality of the entity or instrument rated
• ESG factors are among many material elements considered to form a credit rating opinion
• The disclosure requirements should apply to ratings opinions, rating outlooks and rating action

See full response

European Securities and Markets Authority (ESMA) | Consultation on integrating sustainability risks and factors in MiFID II

In June 2017, the European Commission sent a request for technical advice to ESMA to supplement the initial package of legislative proposals and assist the Commission on potential amendments to the delegated acts under MiFID II.

The PRI supports many aspects of the proposed technical advice from ESMA. However, the PRI strongly recommends that the draft technical advice also provide clarity on investor duties, as set out in Article 21(1) of MiFID II.

See full response

France 

January 

Autorité des Marchés Financiers (AMF) |  Roadmap on Sustainable finance

The PRI strongly welcomes the AMF’s Roadmap on Sustainable finance. Our priority recommendations are:

• The AMF, together with ACPR, should provide guidance on ESG integration and strengthen its oversight by publishing an annual overview of the market.
• The AMF should articulate its activities supporting active ownership and increase transparency of (proxy) voting, as well as improve shareholder filing and accountability of the French stewardship code.

See full response in French

EU

January

European Insurance and Occupational Pensions Authority (EIOPA) | Consultation Paper on Technical Advice on the integration of sustainability risks and factors in the delegated acts under Solvency II and IDD

In June 2017, the European Commission sent a request for technical advice to EIOPA to supplement the initial package of legislative proposals and assist the Commission on potential amendments to the delegated acts under Solvency II and the Insurance Distributor Directive.

The PRI finds that ambiguity around investor duties has been a key barrier and therefore strongly welcomes the legal clarity proposed in EIOPA’s draft technical advice. The PRI recommends that the amendments be further aligned with the High-Level Expert Group recommendations on investor duties, governance and risk management.

See full response