Investors around the world continue to engage on issues of responsibility such as climate change, governance and human rights despite increasing political backlash in many countries over ESG and DEI principles, a new analysis shows.
In its 2024 trends report, the Principles for Responsible Investment found that investors continue to incorporate sustainability factors into their engagement with companies, building portfolios and reporting to clients.
PRI, an independent organization formed in 2005 at the behest of the United Nations, compiles reports from more than 3,000 signatories, including asset owners and investment managers, who have agreed to abide by its principles.
“Our data shows that the perception of an industry-wide shift away from responsible investment practices is overstated,” said David Atkin, CEO of PRI.
“The global sector fundamentally understands that core responsible investment principles help them make smart investment decisions and are good for their businesses. What we are seeing is that signatories are going back to basics, assessing their work and evolving it in line with the world around them,” he said in a release on the organization’s website.
The report shows PRI signatories are continuing to include material issues into the way they pick assets, build portfolios and engage with companies. Financial materiality is the key driver for this activity, PRI found, with over 90% of investment managers having formalized processes to identify and incorporate issues such as physical climate risks and human rights and social-related issues into decisions.
“Our work with investors is and always has been about allowing them to gain better sight of the factors which could impact performance on the corporate balance sheet. We can say confidently that investors agree this work is vital, they’re keeping it up and that they’re seeing the benefit of it,” Atkin said.
Stewardship actions by a large majority (84%) of signatories include incorporating sustainability issues such as climate related risk into proxy voting policies and guidelines. Many now undertake these activities across multiple asset classes, not just equities: 81% are conducting stewardship specifically in relation to their fixed income investments, the report showed.
Asset owners are the main driving force for the industry. The PRI data showed that asset owners are more likely than investment managers to take a longer-term approach to identifying climate-related risks and opportunities and to use climate scenario analysis (58% vs 29%).
Here are the six principles that signatories to PRI agree to uphold:
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the principles.
- We will each report on our activities and progress towards implementing the principles.
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