The Principles for Responsible Investment (PRI) is a global network of institutional investors that work together to propagate and implement its six fundamental Principles. These Principles were founded on the notion that following the ESG criteria is vital to the financial success of every company and has an effect on the performance of investment portfolios.
What started as a 20-person investor group has now grown by leaps and bounds. As of April 2022, more than 4,900 participants in the financial market have become signatories. These include insurance companies, pension funds, sovereign funds, development funds and investment managers.
Here’s what every PRI signatory has pledged to follow:
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
Principle 6: We will each report on our activities and progress towards implementing the Principles.
Each of these Principles has multiple actions listed under them that the signatories are encouraged to follow.
The PRI focuses on using these Principles to drive change in three key areas of impact:
- Responsible investors: By empowering asset owners, supporting investors incorporating ESG issues and fostering a community of active owners to help responsible investors create long-term value and enhance alignment throughout the investment chain.
- Sustainable markets: By challenging barriers to a sustainable financial system and driving meaningful data throughout the markets to create a sustainable global financial system.
- Encouraging a prosperous world: By supporting climate action and enabling real-world impact aligned with the SDGs to create an inclusive financial society for current and future generations.
How can you become a PRI signatory?
- Submit the declaration: The first step is to announce your organisation’s intention to commit itself to the PRI goals. A copy of the declaration (on the company letterhead) signed by the CEO needs to be submitted.
- Provide details: Fill in the application form with the company details, contact information and the reasons for wanting to become a signatory.
- Define your organisation: A list of the organisational chart, showing the structure and a breakup of all the entities need to be sent to firstname.lastname@example.org.
You can access the application and declaration forms here. After you have sent these documents, the PRI will send you a provisional acceptance and an invoice to become a signatory. Post payment, your application will be approved (usually within two weeks), and your organisation will be welcomed as a PRI signatory, with full access to all its resources.
While sustainable investment and impact investment are terms that have been around for a while, the Principles for Responsible Investment are important as they serve as a valuable platform to define a set of expectations that can operate within a traditional fiduciary framework.
To understand more about sustainable investing, go through our series on sustainable finance to explore its aspects.