Principles for Responsible Investment PRI

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(No Transcript)
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PRI Reporting and Assessment Tool
04 July 2007
Jane Ambachtsheer Global
Head of Responsible Investment Mercer Investment
Consulting
Nada Villermain-Lécolier
Global Head of Responsible Investment Strategy
Fonds de Réserve pour les Retraites, FRR
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PRI Reporting and Assessment ToolAgenda

• Overview
• Results
• Identifying Opportunities
• Scoring
• Looking Forward

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OverviewNada Villermain-Lécolier
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OverviewProcess and timeline

• PRI Board decision to provide signatories an
  assessment framework to report on their ability
  to implement PRI and a best practice guide
• RFP procedure 9 proposals were submitted in
  early October 2006. After analysis, and upon the
  assessment group recommendation, the Board has
  unanimously selected Mercer Investment Consulting
  to develop the project and create a flexible
  tool.
• Universal Tool Mercer team worked closely with
  PRI Secretariat, the PRI Assessment Working
  Group, and a range of experts from signatory and
  other organisations. The tool was ready and
  approved by the Board in January 2007.
• Dematerialised tool the online reporting
  interface was launched on PRI web site in
  February 2007, with final online submissions
  accepted until early May 2007.

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Overview

• Tailored according to each principle the
  questionnaire is divided into six different parts
  corresponding to the six principles. Each
  principle is scored independently
• Capture responsible activities in 2006 and
  progress through 2007. Can also be used as a
  reference manual for signatories to use on an
  ongoing basis, as well as a resource for new
  signatories
• First ever global undertaking that captures in
  significant detail if and how investors are
  integrating environmental, social and governance
  (ESG) issues within investment decision making
  and ownership practices and the extend to which
  there are working together and communicating
  about their responsible strategy.

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Overview

• Satisfying response rate in year one
• The questionnaire was completed by 106
  signatories
• 62 asset owners out of 73 invited to participate
• 44 investment managers out of 64 invited to
  participate
• Overall response rate of 77 (75 of PRI AUM)
• Asset owner response rate of 85
• Investment manger response rate of 69

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OverviewAssessment Working Group

• Wilco van Heteren, PGGM Investments
• Marcel Jeucken, PGGM Investments
• Peter Lunt, VicSuper
• Donald MacDonald, British Telecommunications
  Pension Scheme
• Marie-Claude Provost, Caisse de dépôt et
  placement du Québec
• Laetitia Tankwe, Comité syndical national de
  retraite Bâtirente
• Nada Villermain-Lecolier, Fonds de réserve pour
  les retraites (FRR)

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ResultsJane Ambachtsheer
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Results Overall

• Signatories to the PRI are taking their
  commitments to implementing the six Principles
  seriously
• Signatories have performed best in implementing
  Principles 1 (ESG integration) and 2 (active
  ownership). Implementation of the other
  Principles is not as progressed
• The top performers in implementing Principles 4
  through 6 tend to have the widest range of
  scores, which may indicate that a wide variety of
  approaches are being employed by the leading
  signatories in these areas
• Investment managers perform better than asset
  owners overall, and signatories from North
  America and Europe have the strongest performance
  by region

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Results Overall

• ESG integration focuses on listed equity,
  although many signatories plan to extend
  integration to private equity, real estate and
  fixed income in 2007
• The vast majority of signatories are involved in
  collaborative engagement initiatives
• Less than half of asset owners have assessed the
  extent to which their external investment
  managers integrate ESG issues into investment
  decision making
• 43 of asset owners indicated that their
  consultants do not factor in responsible
  investment or ESG issues when short listing fund
  managers

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Results Principle 1Responsible investment
policy statements

• Do you have a formal investment policy statement
  that makes specific reference to the integration
  of responsible investment (RI)/environmental,
  social and governance (ESG) issues within
  investment decision making and ownership
  practices?

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Results Principle 1Specialist staff

• Do you have any specialist staff solely dedicated
  to RI/ESG issue analysis?

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Results Principle 1ESG considerations when
selecting external investment managers

• Does your fund take RI/ESG considerations into
  account when selecting and approving fund
  managers?

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Results Principle 1Assessing external
investment managers on ESG issues

• Have you assessed your external investment
  managers on the extent to which they are
  integrating RI/ESG issue analysis into investment
  decision making?

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Results Principle 2Proxy voting

• PRI signatories regard proxy voting as an
  important engagement tool
• All PRI investment managers are involved in
  voting to some extent, and 93 have a voting
  policy. The high level of attention paid to
  voting by investment managers is also reflected
  in the fact that 85 conduct proxy voting on
  behalf of their clients and 78 can execute
  client-specific voting programmes.
• To what extent did you employ proxy voting in
  your 2006 engagement strategy?

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Results Principle 2Engagement on ESG issues

• To what extent have you developed a comprehensive
  RI/ESG engagement capability?

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Results Principle 3Asking for standardized
RI/ESG issue reporting

• Have you asked that investee companies (or other
  investment entities) produce standardized
  reporting on their RI/ESG issue performance
  (within annual financial reports or other
  formats)?

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Results Principle 4The PRI and service
providers

• Are you including PRI-related requirements in
  RFPs?

• Have you asked your service providers to sign the
  PRI?

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Results Principle 5Collaborative engagement
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Results Principle 6Disclosure of ESG
integration

• Have you disclosed how RI/ESG issues are
  integrated into your investment processes?

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Results Principle 6Communicating with
beneficiaries

• Have you communicated on RI/ESG issues and the
  PRI to beneficiaries?

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Identifying Opportunities
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Identifying OpportunitiesFirst steps and Best
practices for each Principle
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Identifying Opportunities20 real-life PRI in
action examples
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Identifying Opportunities20 real-life PRI in
action examples
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Scoring
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Scoring

• The framework was designed to assist signatories
  in assessment as well as reporting. Many
  questions in the Reporting and Assessment Tool
  were scored, with each answer assigned a
  different score
• For each Principle, signatory scores were ranked
  relative to their asset owner or investment
  manager peers, with signatories being placed in
  one of four groups per Principle
• Because there are no absolute performance
  standards in the PRI, most questions also allowed
  a not applicable option that would not reduce a
  signatorys score
• Individual results will be sent to PRI contacts
  at signatory organisations shortly after this
  annual meeting

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Scoring

• The aggregate scoring outcome will allow the PRI
  to demonstrate the robust nature of the
  initiative and the progress achieved by
  signatories
• The development of relevant and accurate metrics
  is a difficult and iterative process. This years
  assessment is the beginning of an ongoing annual
  process that will be improved over time

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Scoring
Top quartile
Median
Your organisation's score
Bottom quartile
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Looking Forward
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Looking ForwardBarriers

• Signatories continue to face practical and
  cultural barriers to further PRI implementation
• According to many signatories, the tools and the
  conditions required to make use of the Principles
  have yet to fully emerge
• The major barriers identified by signatories
  revolve around resource considerations,
  insufficient research inputs and unsupportive
  operating environments
• There is a deficiency in mainstream, quantitative
  and historical performance attribution data -
  Improved metrics and analytical frameworks are
  required to sufficiently demonstrate performance
  that results from integrating ESG in investment
  processes

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Looking ForwardGoals and aspirations

• Push the ongoing integration of ESG issues
  within equity, credit and fixed income research,
  and thus within the investment process
• Help build the case for materiality of ESG
  factors
• Interact with national and supranational
  authorities in questions related to long-term
  environmental changes and liabilities
• Work with others where possible to promote wider
  acceptance of, and support for, responsible
  investment and to encourage others to adopt the
  PRI
• Participate in a successful clearinghouse
  engagement

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Looking ForwardBeyond 2007

• Many signatories responded that they are
  Planning to in 2007 for many questions next
  years report will demonstrate this progress
• The preparation for next years implementation of
  the Reporting and Assessment Tool will begin in
  September and it will likely launch near the
  beginning of 2008
• Please share your ideas for next year and help
  ensure the PRI Reporting and Assessment Tool is
  as beneficial as possible for signatories
• For example Employ a user ID and password for
  each signatory, make it easier to print the
  responses, etc.

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Contact information

• Mercer Investment Consulting
• jane.ambachtsheer_at_mercer.com
• 1 416-868-2659
• PRI Secretariat
• info_at_unpri.org
• www.unpri.org
• The full set of aggregate data will be available
  on the PRI website at www.unpri.org/report07