The Principles for Responsible Investment (PRI) has called on its investment manager signatories to ramp up their stewardship policies with broader coverage across AUM, asset classes and ESG issues, reports affiliate title Responsible Investor.
The PRI made the recommendation as part of a new analysis of 1,858 investment manager signatories conducted for the 2021 round of its reporting framework.
The framework was relaunched in January after a hiatus following issues raised by signatories regarding the 2021 round.
According to the analysis, while 70 percent of investors have a stewardship policy, “important details of those policies may be lacking”.
In some cases, policies were only applicable to a small percentage of AUM or provided limited details on specific issues. For example, less than half outlined managers’ climate-related stewardship approach.
In response, the PRI has suggested that investors further develop best practice by expanding and advancing their stewardship policies across AUM, asset classes and ESG issues. “Stewardship is well established as an impactful tool to facilitate long-term and systemic advancement on important responsible investment issues,” the report said.
In December, the Thinking Ahead Institute was commissioned by the PRI to research and assess the appropriate level of resources that institutional investors should be prepared to dedicate to stewardship within their organisations.
Representatives from USS, Wellington, Credit Suisse and MSCI are among the signatories of a working group tasked with advising on the programme.
The PRI’s analysis also found that, although three in four asset owners require responsible investment disclosures for major asset classes, close to one in five managers do not include ESG information in client reporting for most AUM.
In addition, some data is only reported by a minority of managers: 46 percent report quantitative information, 35 percent release progress on sustainability outcomes, stewardship results were reported by 40 percent, and only 10 percent said how ESG considerations contribute to financial performance.
“Reporting quantitative progress on these areas would be a welcome step,” said the report.
The PRI also called on managers to “develop detailed, public responsible investment policies”, noting that asset owners use these policies and guidelines for manager selection.
For instance, its analysis found that in 2021 more than 70 percent of investment managers opted not to disclose how they deal with conflicts of interest in their responsible investments.
Shifting to TCFD, despite 43 percent of signatories publicly supporting it, the PRI “found clear implementation gaps”.
One in five investment managers has not identified any specific climate-related risks, close to 20 percent of firm boards do not oversee climate-related risks and opportunities and more than 60 percent are not conducting scenario analysis.
Responding to the report, Toby Belsom, director of investment practices at the PRI, said: “The data from our reporting process highlights areas for further work in raising the standards of leading practice among investment managers.
“By committing to these steps, managers can realise the benefits of a more comprehensive overarching responsible investment strategy, deliver increased transparency to their clients and contribute to collectively higher standards across the board, which in turn delivers cumulative positive progress for the industry.”