What Are the UN Principles for Responsible Investment (PRI)?
UN Principles for Responsible Investment (PRI) are a set of six principles that provide a global standard for responsible investing as it relates to environmental, social and corporate governance (ESG) factors. Organizations follow these principles to meet commitments to beneficiaries while aligning investment activities with the broader interests of society.
Understanding the UN Principles for Responsible Investment (PRI)
The six principles for PRI are based on acting in the best long-term interests of retail and institutional investors, the financial markets, the economy, and the environment and society as a whole. The United Nations (UN) supports the principles, and a separate nonprofit organization oversees the program.
Organizations called signatories must publicly commit to adopt and implement the UN PRIs where they are consistent with the signatories’ fiduciary responsibilities. Below are the six principles and a non-exhaustive list of ways that organizations promote each principle.
The Six UN Principles for Responsible Investment
1. We will incorporate environmental, social and corporate governance (ESG) issues into investment analysis and decision-making processes. Signatories can follow the first principle by supporting the development of ESG-related tools, metrics, and analyses and by encouraging research and analysis by service providers and academics on ESG-related issues.
2. We will be active owners and incorporate ESG issues into our ownership policies and practices. Signatories can follow the second principle by promoting and protecting shareholder rights and by engaging with companies on ESG issues.
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest. Organizations can ask companies to integrate ESG components into their annual financial reports and request standardized reporting of ESG issues through tools such as the Global Reporting Initiative (GRI). The GRI is a sustainability reporting effort that asks organizations to disclose their impact on issues such as climate change, human rights, and corruption.
4. We will promote acceptance and implementation of the principles within the investment industry. Signatories can communicate their ESG expectations to service providers and revisit relationships with providers that do not adhere to ESG guidelines.
5. We will work together to enhance our effectiveness in implementing the principles. Organizations can collaborate to address new issues and support initiatives by sharing information, tools, and resources.
6. We will each report on our activities and progress towards implementing the principles. Through this principle, organizations can raise awareness of ESG principles among stakeholders and beneficiaries.
The signatories voluntarily agree to uphold, support and promote the principles while better managing risk and seeking to responsibly increase investment returns. Signatories demonstrate their commitment to responsible investing and a more sustainable financial system and join a community of like-minded organizations.
What Organizations Are Eligible to Become Signatories?
To be eligible to become a signatory, an organization must be an asset owner, investment manager or service provider. Examples of asset owners include pension funds, sovereign wealth funds, foundations, endowments, insurance, and reinsurance companies and other financial institutions that manage deposits. Investment managers are organizations that oversee a third party’s assets in the institutional or retail market. Service providers offer products or services to asset owners and/or investment managers.
Signatories must provide a signed declaration on company letterhead to commit to ESG issues in their investment analysis and decisions, to promote the PRIs within the investment industry and to publicly report on their progress toward implementing the principles. The principles are considered aspirational, and organizations may become signatories if they are working toward the principles. Becoming a signatory also requires payment of a fee that is based on the signatory’s category, type, and assets under management (AUM).