The Principles for Investors in Inclusive Finance (PIIF) were launched in January 2011 to provide a framework for responsible investment in inclusive finance.
Inclusive finance carries with it the responsibility for all actors in the financing chain—investors, retail financial service providers and other stakeholders—to understand, acknowledge and act in accordance with the interests of the ultimate client. These clients typically have low incomes and are constrained by asymmetries in financial knowledge, power and influence. As such, access to finance must be provided in a way that protects client interests.
The PIIF, aligned with the United Nations-backed Principles for Responsible Investment (PRI), are signed by direct investors or fund managers and indirect investors investing via funds or holding companies. By signing, investors signal their intent to uphold the Principles in their own investments, and to support other actors in the financing chain to implement the Principles. The PIIF provide a framework to enable signatories to share emerging good practice and collaborate to achieve this objective. The Principles were designed by and for institutional investors (pension funds, insurance companies, development finance banks, foundations, endowments and investment managers). As of February 2013 there were 51 PIIF signatories, mainly private institutional investors (15 asset owners and 36 investment managers), across 11 different countries.
The Principles are accompanied by a self-reporting framework with different indicators for direct and indirect investors. The Framework is primarily designed to encourage transparency and accountability and to support dialogue between direct and indirect investors.
This report provides a summary of the submissions made by participating PIIF signatories to the pilot of the Reporting Framework in June 2012. Fifteen direct and 13 indirect investors participated, but the results from direct investors only are presented here because this group reported against more indicators. The report offers insights into investors’ collective responsible investment practices in inclusive finance for the first time. It enables signatories and others to see the progress being made to translate the PIIF into action, with examples of emerging good practice and areas for improvement.
Fifteen direct investors participated in the pilot, of 24 eligible to do so at the time (June 2012).
- All participants have endorsed the Client Protection Principles and the majority are incorporating these into their policies and practices.
- Most participants f investment decision making takes into account social performance of investees, but staff incentives are not always linked to social performance.
- Just over half collect data on the proportion of the retail providers in which they invest that provide financial products beyond credit; on average, 48% provide savings and 44% offer insurance.
- Nearly 90% report a procedure to integrate environmental issues into their investment decision making.
- Active involvement in corporate governance is mixed; on average, equity investors report having board seats with half of their investees.
- Areas where there is room for improvement include incentivising social returns, playing an active role in corporate governance, investors f transparency and their encouragement of investees f transparency on pricing and other terms and conditions to the ultimate client.