Asset Consulting Services Review Advisory Committee

Terms of reference

The PRI’s mission sets out our belief that an economically efficient, sustainable global financial system is a necessity for long-term value creation. As part of our Blueprint for Responsible Investment we have committed to address the barriers to a sustainable financial system – our Sustainable Financial System (SFS) work.

The PRI has identified that the role asset consultants play in the investment chain is an important and necessary enabler of a sustainable financial system. Asset consultants provide a range of advisory services to asset owners. Investment consultants strongly influence the investment strategies and resulting asset allocation decisions of pension schemes. They also act as a selection mechanism with respect to investment managers, and provide training to sponsors and trustees on investment approaches and emerging investment trends.

Our research finds that strategic asset allocation does not properly account for sustainability issues: investment advice and investment strategy advice are considered independent of sustainability issues and in particular, of the alignment of the financial system with long-term value creation and resilient, sustainable economies: and, weak implementation by asset consultants and their asset owner clients creates a multiplier effect throughout the investment market, which limits the willingness of investment managers to integrate ESG issues in their investment products, and ultimately, the way in which companies are managed.

Objectives

The work steam aims to ensure that sustainability issues are properly integrated into the advice being offered by asset consultants and used by asset owners.

The Advisory Committee will be expected to:

provide expert insight on the current treatment of ESG issues in asset consulting, including strategic asset allocation, research, manager appointment;
identify a range of interventions the PRI and signatories should make in order to ensure that sustainability issues are integrated into the advice provided by asset consultants;
identify ways that asset owners can hold asset consultants to account on investment advice;
explore policy and regulatory barriers to the integration of sustainability issue into the advice being offered by asset consultants and potential policy solutions.

Relationship to the Board Policy Committee

The asset consulting services review is part of the Sustainable Financial System work which is overseen by the PRI Board Policy Committee. The Trustee Readiness Advisory Committee will provide expert input into the project and report on progress to the Board Policy Committee. The Board Policy Committee will have oversight on the strategy and direction of the project.

Members

The Committee, which will work closely together with the Executive, will consist of PRI signatories supporting the objectives of the SFS work.

The Advisory Committee will act in an advisory role to the PRI Executive to provide inputs, advice and feedback to help strengthen and ensure the credibility of this work.

Target composition

4 asset owners in UK, US, Japan or Australia;
4 asset managers that market their products in UK, US, Japan or Australia;
4 asset consultants with a mix of size / approach to ESG.

Requirements for committee participation

Role of the Chair

The Committee Chair commits to dedicating sufficient time and resources to fulfil Chairing responsibilities, which include, but are not limited to:

chairing meetings;
advising the Executive regarding relevant asset consultant insights;
providing the Executive with guidance and working with the Executive to provide leadership to the Committee as needed.

Role of Advisory Committee meetings

Members of the Committee agree to commit sufficient time to produce and promote the output of the Advisory Committee. Typical responsibilities may include, but are not limited to:

committing to a minimum of three calls per year, one of which may be in person;
supporting with preparing analysis and drafts of required work including integrating Committee members’ feedback;
providing regular guidance/feedback to the Executive on relevant asset consultant insights – this may include providing advice/feedback on outputs such as publications, toolkits and the work stream strategy;
outreach and engagement with peers on behalf of the PRI – the PRI Executive can provide support in the form of background research and material.

Appointment of committee members

The Executive will publicise membership opportunities as they arise, including the criteria for appointment of members and timelines – via relevant newsletters and the PRI website. The Executive will review applications. Final decisions on the Advisory Committee composition are at the discretion of the Executive.

If a member does not demonstrate the required level of commitment and engagement, then the Executive may terminate that signatory’s participation and invite other interested signatories to participate.

Confidentiality

The Advisory Committee theme and members of the Committee will be available on the PRI website. The PRI Executive may record Advisory Committee meetings for internal purposes (i.e. note taking). Recordings will not be circulated externally, including to members.