Responsible Investing
In August 2009, the AVCAL Council asked AVCAL GP members to seriously consider signing the UN Principles for Responsible Investment.
This decision was taken after consultation with the Australian industry, the AVCAL Responsible Investing Working Group and the investor community. This information has been prepared to assist you in understanding the implications of signing and connect you with useful information.
AVCAL will also facilitate professional development programs that support the principles.
Please check the training schedule for an update.
UNPRI and GPs: the basics
What is it?
The Principles for Responsible Investment are designed to be a framework to incorporate environmental, social and corporate governance (ESG) issues into mainstream investment decision making and ownership practices.
What are the principles?
01 Incorporate ESG issues into investment analysis and decision making processes
02 Be active owners and incorporate ESG issues into ownership policies and practices
03 Seek appropriate disclosure of ESG issues by the entities in which we invest
04 Promote acceptance and implementation of the principles within the investment industry
05 Work together to enhance effectiveness in implementing the principles
06 Report on activities and progress towards implementing the Principles
The Principles are designed to be voluntary and aspirational. There may be reputational risks associated with signing up and then failing to take action, but the commitments are, for most signatories, a work in progress and a direction to head in rather than a prescriptive checklist with which to comply.
There is only one mandatory requirement of being a signatory which is to complete the annual Reporting and Assessment process. This is an online, self-assessment survey designed to evaluate a signatory’s progress in implementing the Principles. This process usually occurs in March. New signatories are given a year’s grace from this requirement. Signatories who do not comply with this reporting requirement may be delisted. Aggregated results from the survey are published in the PRI’s annual Report on Progress. Individual results are not currently published, unless a signatory chooses to do so. However, the PRI Initiative announced at its 2009 Annual General Meeting that it plans to introduce a minimum public reporting requirement for all signatories from 2011.
How do we sign?
Send an email to the PRI asking to be included as a signatory. Full instructions here.
There is a suggested annual voluntary contribution of US$10,000 to help the work of the Secretariat in supporting signatories and promoting the Principles. The PRI Initiative announced at its 2009 Annual General Meeting that it plans to introduce an annual mandatory minimum fee from 2011. The mandatory fee will be scaled depending on fund size but it is not currently anticipated to be more than US$10,000.
What happens next?
New signatories are asked to take part in a joint introductory phone call which will introduce them to the PRI intranet. The PRI Intranet allows signatories to share information and collaborate, it also holds a substantial amount of research and other material about ESG issues and implementing the Principles. Signatories can also sign up to receive various periodic newsletters and alerts and to receive invitations to webinars and telephone conferences.
Each year, signatories are invited to attend an annual event to share experience in person.
How do we find out more about it?
More information can be found at www.unpri.org including background and who current signatories are.
Practical guidance
In July 2009, the UN launched "A Guide for Limited Partners" that provides more guidance and information on the possible expectations of a signatory. This is expected to be updated in 2010.
As is apparent from the guide, some practical steps to committing to the principles for a GP might involve some of the following:
- Design and adopt a policy on ESG
- Provide training for your investment team on ESG issues
- Include ESG analysis in investment committee papers
- Add ESG issues to 100 day plans
- Be prepared to explain your approach to ESG issues to investors in your funds
- Report on significant ESG issues in quarterly reports and where relevant at annual investor meetings
- Include ESG issues among matters to which your portfolio is subject to periodic review
Enquiries should be directed to members@avcal.com.au