PRI’s three-year strategy: building a bridge between financial risk and real-world outcomes

Give your feedback on the 2021-2024 strategic plan consultation

Since the launch of our ten-year Blueprint for responsible investment three years ago, we’ve seen the beginning of a significant shift in momentum when it comes to responsible investment. Uptake of ESG investing has begun to accelerate as responsible investment philosophies and practices have both moved toward the mainstream and begun to mature.

While there is clearly still much more to be done to achieve our mission, today for the first time, we’re beginning to be able to widen our focus and thinking on sustainability.

Undoubtably this trend was already underway; however, the COVID-19 crisis has accelerated its progress in a substantial way. The world has woken up and is finally beginning to understand the importance of sustainability, the interconnectedness of issues and that the foundations of a healthy economy must have at its heart, healthy people and a healthy planet. The small silver lining we see amidst all this tragedy is the significant boost it has given sustainability and the opportunity it has provided to leverage the crisis to build back better.

In the face of the pandemic, it’s clear that achieving the Blueprint agenda is more important than ever. And it’s against this backdrop of uncertainty, but also of momentum, that we’re preparing to launch our next three-year strategy.

The PRI’s new strategy is, most importantly, driven by our signatories—by what brings them value and advances our shared vision of the future. We received invaluable input and insight from our signatories, which we’ve mapped back to our Blueprint. Through this lens, we’ve developed a draft strategy, which will be under signatory consultation from 21 October until 25 November 2020.

Where our past strategies have focused on getting started, building a fit-for-purpose organisation, achieving growth and expanding the breadth and depth of our expertise, this one is about building a bridge between financial risk and real-world outcomes, ensuring that we understand not just the ESG risks to our portfolio, but also the risks of our portfolio on the real world. It reflects the evolution of the industry and will enable the PRI to play its part in realising a more sustainable, green and just recovery.

Our forthcoming strategy will therefore centre around eight key areas, which demonstrate our direction of travel.

The first two elements are closely linked, namely helping investors drive real-world outcomes, which are in line with the Sustainable Development Goals (SDGs). We will work closely with investors to identify outcomes, set targets and ultimately to shape those outcomes to help deliver the SDGs. To enable this, we will further our fiduciary duty programme to understand existing legal frameworks to enable sustainability outcomes while working to create the tools, practices, and policy settings to make this possible.

Importantly, we will also seek to drive meaningful, consistent and comparable data which is critical to tackling the roadblocks to sustainability. This will go beyond just risk-related data and look at the end-to-end, delivering data that is decision useful and which seeks to measure sustainability outcomes.

Fourthly, over the next three years we will seek to elevate social issues, particularly human and labour rights, which have been brought to the fore and, in many cases, exacerbated by the pandemic. Though institutional investors have a responsibility to respect human rights, defined in international human rights standards, many are unclear on how to fulfil their responsibility. We will seize this momentum to launch our five-year programme on human rights.

As part of our strategy, we will also strive to usher in a new, more ambitious era of stewardship. The aggregate impact of current stewardship practices is failing to meaningfully reduce systemic risks and address the SDGs. Our Active Ownership 2.0 programme will see stewardship move beyond box ticking and explicitly prioritise the seeking of outcomes over process and activity, and common goals over narrow interests.

A critical focus of this more ambitious stewardship is on the sixth key component of our strategy, namely achieving net-zero commitments from investors, businesses and governments. Climate action from investors through initiatives such as the PRI/UNEPFI Asset Owner Alliance and Climate Action 100+ is critical to the transition; without the finance sector we will not solve climate change and the transition simply won’t occur with the urgency required.

Looking inward at the PRI, to enable these six real-world changes, we will increase accountability and celebrate leadership within our global signatory base.

Our new Reporting Framework will broaden from focusing exclusively on processes and policies to also cover outcomes, and whilst we have streamlined the Reporting Framework, we have also set a higher bar to achieve the top grades. In addition, in the consultation document we have proposed increasing the minimum standards, ensuring that it really means something to be a PRI signatory.

Initiatives such as our Leaders’ Group and the PRI Awards will support signatories to be purposeful, consistent, transparent, engaged and responsible. This is not only about giving credit where it’s due, but also providing an opportunity to educate and inspire other signatories, so that they can learn from leading practices, raising the bar for responsible investment across our membership.

Of course, supporting ESG incorporation remains critical to this strategy. We will continue to develop resources for those new to responsible investment as well as to respond to industry developments with work on asset classes and strategies where incorporation continues to progress.

Now it’s over to you and I encourage you to review the 2021-2024 PRI strategic plan consultation paper in full. Signatories are invited to give their feedback until 25 November to help shape our final strategy, which will be launched on 1 April 2021.

Together we’ve created a truly aspirational agenda, one with the ability to shape a sustainable future. I look forward to collaborating with you to finalise the strategy and then, most importantly, to deliver on these ambitions.