Public policy critically affects institutional investors’ ability and incentives to generate sustainable returns. It also affects the sustainability and stability of financial markets and of social, environmental and economic systems. Policy engagement is therefore a natural and necessary extension of investors’ duty to act in the best interests of their clients and beneficiaries. This handbook sets out why investors should engage with policy makers, how they are doing so and offers guidance to help investors get started.

Policy sets the rules of the game: it defines roles, responsibilities and accountabilities, it creates risks and opportunities, and it arbitrates between competing interests. Public policy aims to build the foundations that support the development of society towards shared goals, taking into account collective interests and political preferences, and addressing market failures.

Policy reforms relating to sustainable finance and the alignment of financial flows with sustainability goals are becoming mainstream. Investors have a clear interest in ensuring that these measures are effective, efficient, support sustainable financial returns and deliver clear social and environmental benefits.

Policy engagement can be an effective tool for shaping more effective policy frameworks in support of and in alignment with the PRI’s six principles for responsible investment. In recent years, many PRI signatories have gained extensive experience in engaging with policy makers.

Policy engagement can be conducted directly or through third parties, working groups, or collaborative initiatives, including the PRI. Investors can engage with policy makers by different means: for example, by responding to policy consultations, providing technical input via government or regulator-backed working groups, participating in sign-on letters, or by directly communicating with policy makers.

Investors can also contribute to different types of policy reform, ranging from those that affect their duties directly (for example, financial regulations such as the EU Sustainable Finance Disclosure Regulation) to regulations that affect listed companies (such as the EU Corporate Sustainability Reporting Directive) and broader, real-economy policies and government strategies (such as the EU’s Fit for 55 strategy and RePowerEU).

Practical recommendations for policy engagement 

We recommend that investors:

  • identify opportunities to engage, directly or through initiatives like the PRI;
  • collaborate with other investors, exchange views and support common goals;
  • set up a strategy and commit resources to engage effectively;
  • set up internal processes to ensure compliance and accountability;
  • build relationships with policy makers for the long term.

Investors and investor collaborations should also:

  • have a clear rationale for action: the issue in question must be important and there should be a reasonable likelihood that policy action will be effective;
  • provide a detailed explanation of the impact on the beneficiaries that investors represent;
  • engage early: at the early stages of the policy process, policy makers often look for advice and suggestions from different stakeholders;
  • understand and work to policy makers’ timetables;
  • articulate the benefits in terms that are of interest to the policy maker in question;
  • understand which legislative committees and regulators have jurisdiction over the issue in question;
  • engage at all levels of the policy process.

For detailed recommendations and further background, please see the full paper below.