Sustainable Investment in China | Principle 6: Transparency and Reporting

The PRI Principles encourage investors to ask companies to improve their disclosure and performance on ESG issues. Investors also need to be transparent about how they use ESG information in their investment decisions and ownership activities. The final PRI Principle asks signatories to report on their activities and progress toward implementing the Principles. At the heart of Principle 6 is the belief that comprehensive disclosure is essential to investors becoming more accountable to beneficiaries, clients, and wider society.

One method for investors to report on their activities and share their experiences is by completing the annual PRI Reporting and Assessment survey. The survey includes 88 questions for both investment managers and asset owners and has the following objectives:

• It’s a learning tool to help signatories monitor their organizations' progress on implementing the Principles. The process provides a detailed, principle-by-principle analysis of implementation, with peer comparisons, both locally and internationally, and over time.
• It provides an opportunity for the PRI Secretariat to identify best practices, interesting developments, and practical implementation ideas, and share these with signatories through case studies, articles on the PRI extranet, and webinars.
• It serves as an accountability mechanism for both signatories and the PRI Initiative.
• It provides an “off-the-shelf” reporting framework that can be used by signatories to report to clients, beneficiaries, customers, and the broader public on their responsible investment activities.

In 2011, more than 40 percent of investors publicly disclosed their survey responses, which are available at www.unpri.org/report11. Starting in 2013, all PRI signatories will publically disclose parts of their responses on the PRI website.

OTHER RESPONSIBLE INVESTMENT REPORTING

In addition to the Reporting and Assessment survey, many investors publicly disclose their proxy voting policy—55 percent of investors did so last year. Some major pension funds such as CalPERS—the largest state pension fund in the United States—use voting as a primary means to influence a company’s operations and governance. CalPERS votes more than 7,000 times annually, and one of their underlying tenets is to make its voting decisions public on its website. Often, this is done in advance of annual meetings, which allow it to:

• Demonstrate how they value strong ESG performance.
• Provide a proactive forum to encourage support from other investors.
• Open up dialogue avenues with corporate boards, investors, and other stakeholders.
• Show a leadership standard.

Throughout this article series we have been highlighting some best practices for investor activities in the implementation of the PRI Principles. In five years, the Initiative has grown to 850 signatories and US$25 trillion assets under management, indicating that responsible investment is becoming a core activity for many investors. The six Principles are aspirational, and while there is no minimum requirement for investors, it’s clear that investors are “racing to the top” in their reporting, integration, and engagement on ESG issues. This is not just a feature for large investment managers, but for smaller funds too.

We welcome the involvement of Chinese institutional investors in the PRI Initiative.

To find out more about the PRI or how to become a signatory, please visit www.unpri.org/sign.