- This page provides a quick summary of how an investor can develop and implement a responsible investment policy and related processes.
- It covers how to embed responsible investment into an organisation’s structure and processes – starting with the investment policy.
- For more information on anything on this page, or responsible investment more broadly please get in touch
Responsible investment aims to combine better risk management with improved portfolio returns, and to reflect investor and beneficiary values in an investment strategy.
This page will first take you through the following steps to embed responsible investment into organisational structure and processes:
Responsible investment can be integrated into investment policies in many ways, including high-level public statements, codes of business practice, a standalone responsible investment policy or by embedding responsible investment considerations into an organisation’s main investment policy.
|Integrated investment policy||Standalone responsible investment policy|
|Investors can develop their core investment policy to cover all long-term factors, thus aligning responsible investment decisions with mainstream policy considerations.||Not all investors areready to incorporate their responsible investment objectives into their core investment policy. Developing a separate responsible investment policy can be a good place to start.|
A policy has many purposes, including:
- serving as a starting point to discuss the organisation’s position on ESG issues with external and internal stakeholders;
- clarifying how an investor interprets its fiduciary responsibilities to beneficiaries and clients;
- guiding external asset managers on how they should handle ESG issues;
- demonstrating the organisation’s responsible investment approach to regulators, clients and other stakeholders.
Writing a policy
There is no one-size-fits-all approach to writing a policy; it must reflect the organisation’s unique attributes, goals and purpose, and avoid generic or boilerplate language. However, most policies include the following components:
- Purpose: Why the policy has been developed and how the organisation defines responsible investment
- Scope: Whether the policy applies to all assets under management, or certain geographic regions or asset classes
- Legal and regulatory factors: The legal and regulatory requirements or fiduciary responsibilities guiding the organisation
- Responsibilities: The individual(s) accountable for achieving the policy’s commitments
- Implementation: How the organisation plans to fulfil the commitments and monitor progress
- Engagement: How the organisation will encourage investees to improve ESG risk management and develop more sustainable business practices
- Reporting: How the organisation intends to report on progress
- Review: How and when the policy will be reviewed
Developing a responsible investment policy – and having senior-level commitment and internal or external staff to implement it – are among the minimum requirements for being a PRI signatory.
Implementing the commitments set out in a policy requires an investor to have appropriate systems in place throughout the organisation.
Policy commitments should be backed up by specific quantitative or qualitative targets, with deadlines where relevant. They can be grouped into organisational changes or portfolio impacts. Typical areas to cover include:
- staff training;
- company engagement results;
- reducing the portfolio’s carbon footprint.
Training on responsible investment can raise awareness of a policy internally and ensure that staff have the information and tools required to meet the stated policy commitments. The PRI Academy, an online platform, offers the Getting Started in RI, Foundations in RI, Advanced RI Analysis and RI for Trustees courses, both for individuals and across organisations.
ESG teams and committees
The way a company chooses to include ESG staff in its organisation will depend on a range of factors including the organisation’s resources, business model, client base, existing responsible investment expertise and team structure. Two common approaches are to have a standalone ESG team or to integrate ESG knowledge into an investment team – or a mix of both.
|Integrated responsible investment teams||Standalone ESG team|
|Portfolio managers and investment analysts analyse ESG issues and integrate their findings into overall investment analysis and decisions, as well as handling engagement activities. This approach often relies more heavily on external data, research and analysis.||A standalone ESG team conducts the ESG analysis and engagement activities, which the investment teams integrate into overall investment decisions. These approaches tends to involve more bespoke research and analysis.
Standalone ESG and investment teams should work closely together, meet regularly and communicate proactively.
For investment managers, ESG committees overseeing the integration of ESG into investment and business decisions might involve internal or external experts, with a mix of investment, research, leadership and risk management expertise, as well as client managers. This ensures all organisational perspectives are considered when implementing the policy.
Asset owners should ensure that the service they receive from their investment consultants, whether covering specific assignments or the full-service suite, are aligned with their own responsible investment objectives, strategies and policies.
This involves assessing issues such as:
- Alignment: Are the investment consultant’s ESG-related principles aligned with those of the asset owner?
- Senior-level commitment: Are the investment consultant’s senior management team and the business as a whole committed to ESG investment services and responsible investment?
- Capabilities: Does the investment consultant have the systems, resources and experience it needs to support the implementation of the asset owner’s ESG-related principles?
Monitoring and reporting
Monitoring progress and reporting to stakeholders can be done through a variety of organisational, fund and investment-level mechanisms. Reporting may need to be tailored to specific audiences, such as clients, trustees, employees, regulators, civil society and the media.
Examples of tools for reporting responsible investment activity:
A policy must be reviewed regularly to measure success and determine whether it continues to reflect the organisation’s investment beliefs. For example, there may be new approaches to responsible investing that could be incorporated, or the organisation may have expanded into a new asset class that the policy does not yet cover. If targets have not been met, it is important to evaluate what went wrong and why, and introduce measures to ensure future success. PRI signatories can evaluate their responsible investment progress through PRI Reporting, including benchmarking their performance against their peers.
For organisations that are looking to increase their responsible investment commitments, the PRI Leaders’ Group offers examples of investors at the cutting edge of responsible investment, to encourage others to improve their performance and share their own examples of good practice. Where the Leaders’ Group recognises organisational excellence on a particular theme, the PRI Awards showcase examples of individually excellent projects.
Browse all PRI resources and platforms using the menus above, or search for a particular report, event, signatory or other piece of content using the search field in the top-right.