Today the reporting cycle for the UN PRI begins. As the world’s biggest responsible investing initiative with > 5,000 investors and €130 tr in AuM, the redesigned reporting framework draws on extensive signatory feedback to provide an improved experience, enhancing both clarity and consistency, while reducing the overall effort. In this blog post, we focus on the reporting of investment stewardship and how Esgaia fits into the picture.
The new reporting framework sends a strong signal to the industry about growing expectations in responsible investing across asset classes. With a focus on process and implementation, i.e. the HOW, the framework tries to balance reduced prescriptiveness with increased comparability, while accommodating for differences in investor size and style.
Consisting of 12 modules with two types of indicators, ‘Core’ and ‘Plus’ indicators, the voluntary Plus indicators have an additional focus on outcomes to better understand signatories’ responsible investment practices' impact on the world and to outline leading practices.
Evolving investment stewardship expectations
The PRI defines stewardship as: ‘the use of influence by institutional investors to maximise overall long-term value, including the value of common economic, social and environmental assets, on which returns, and clients’ and beneficiaries’ interests depend’.
With this in mind, stewardship on its own however is no longer enough. Whether the primary focus is to improve the risk-return profile of underlying investments or to improve outcomes, Signatories need to show the strategic intent of their stewardship and how it relates to investment decisions. This way, investors get to explain and exemplify their strategy in practice, including but not limited to investees and the broader sphere of influence, collaboration, proxy voting, and escalation.
Key takeaways:
Stewardship and engagement go beyond just listed equities to encompass every asset class.
ESG materiality risks and impacts, and the management thereof, should now account for both single and double materiality.
The importance of identifying suitable action points and levers of influence to impact sustainability outcomes and objectives.
Inclusion of detailed reporting around the systematic sustainability issues of human rights and climate change, with scope for additional issues.
How Esgaia can help
While the reporting framework doesn’t explicitly mention the use of stewardship systems or supporting IT capabilities, we believe most investors understand the importance and benefits of adequate ESG data management and tracking.
As it regards your investment stewardship, by structuring data capture, performance monitoring and information sharing, you’ll save important time and resources, hopefully increasing the overall quality of your stewardship.
In relation to the reporting framework, Esgaia can help you;
track engagements with current or potential investees (e.g. public companies), non-issuer stakeholders (e.g. external investment managers or policymakers), and dialogues with private companies and/or real assets.
record activities conducted individually or collaboratively that contributed to desired changes in targeted entities.
capture how stewardship activities and priorities are linked to investment decision-making and vice versa by supporting information-sharing between stewardship leads and investment decision-makers (if the two roles are separated).
highlight different escalation measures by linking activities to engagement profiles, such as voting in favour of specific shareholder resolutions,
provide a tool to systematically record intended and unintended sustainability outcomes connected to stewardship activities.
Esgaia’s software is trusted and used by over 35 investors globally, collectively representing more than €3,5 trillion in AuM. If you’d like to know more about how our stewardship system can support you, please contact us!
//Esgaia Team