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Singapore
Singapore, 9 September 2009

A significant number of mainstream investors have ‘turned a corner’ on how they put responsible investment into practice according to new data from the UN-backed Principles for Responsible Investment (PRI) Initiative. There are currently over 560 signatories to the PRI, an investor partnership with the United Nations Environment Programme Finance Initiative and the UN Global Compact. There are now over US$18 trillion in assets signed up to the six principles.

The key findings of the PRI’s annual assessment of its signatories show signs of a growing culture of active ownership and collaboration among investors in response to the financial crisis. Signatories are noting that the financial crisis has strengthened their belief that responsible investing, based on proper consideration of ESG issues within the investment process, is a key component of a successful investment strategy.

The PRI Reporting and Assessment process was managed by Mercer on behalf of the PRI, for the third year in a row. Almost 300 global pension funds and fund managers, all signatories to the PRI, were surveyed on how they have been implementing the six responsible investment principles.

Some of the key results are as follows:

• Scores recorded by signatories in Asia Pacific and emerging markets were lower than in North America and Europe.

• Two-thirds of asset owners, such as pension funds, include responsible investment elements into contracts for the external managers of their investments. However, a much smaller number (less than 15 percent) include these factors in incentive structure of externally managed funds.

• A majority of signatories are considering RI/ESG capabilities where relevant when selecting various categories of service provider. The proportion of signatories encouraging their service providers or peers to become PRI signatories or consider RI/ESG factors increased in 2008 over 2007 for all respondents (65 percent of signatories encouraged their service providers in 2008 versus 56 percent in 2007.) This means that more pressure is being exerted on non PRI signatories to consider responsible investment approaches.

• Among signatories who responded both this year and last year, the percentage stating that they integrate ESG considerations increased for listed equity (both developed and emerging markets), private equity, and hedge funds.

Mercer’s National Partner, Global Head of Responsible Investment Jane Ambachtsheer, who was heavily involved in preparing the report said, “It is very impressive to see the increase in the level of responsible investment implementation over the past three years. It is interesting to note that investors involved in the PRI since the beginning achieved higher results than newer signatories. This likely reflects two things: First, these funds have had more time to develop and further their implementation approach. Second, the signatory base is becoming more diverse. Each signatory comes in at a different starting point – and increasingly, from different perspectives."

“In reviewing the data, we tried to assess what proportion of the market as a whole within each asset class was subject to integration by PRI signatories managing assets internally. Overall, the figures show that while responsible investment practices are on the rise – we still have a way to go. Listed equities in developed markets subject to ESG integration by signatories reflect 5 percent of the total market (or 3 percent in developing markets). However, the highest figures were quite substantial, with listed real estate at 15 percent followed by 12 percent for corporate fixed income.”

“Outside of Australia and New Zealand, there are very few Asian signatories to the PRI,” explained Helga Birgden, Mercer’s Head of Responsible Investment, Asia Pacific. “The notable exception is Japan, with 11 signatories. Overall, Japanese signatories achieved lower self assessment scores across the various areas of PRI implementation.”

Dr Xinting Jia, Asia Pacific said, “Even with low Asian representation, this report is a valuable tool to help our clients consider becoming signatories. They can use the information in this report to benchmark themselves against global asset owners and investment managers in the area of responsible investment – a topic that is rapidly increasing in importance within Asia and around the globe.”

This year, the validity and consistency of responses were enhanced through one-hour verification calls with 100 signatories, providing an opportunity to review, discuss and elaborate on responses to key questions.

Ambachtsheer added, “The verification process was structured to both confirm responses and ensure consistency in how questions are answered. By and large, signatories reacted positively to the verification process. Following verification calls with 100 signatories, the average number of changes for each signatory was two, with roughly an equal number of adjustments made both up and down overall.”

James Gifford, Executive Director of the PRI said, “It is striking to see the growth in responsible investment in a year of financial crisis. Not only are more and more mainstream institutions signing the PRI, but this survey shows that they are moving ahead each year in their implementation of the principles”.

Notes to editor

More details about the PRI can be found at www.unpri.org or in the Annual Report of the Initiative, also released today. For more information contact Elliot Frankal, PRI communications manager on ++ 44 (0)7989 524780 or elliot.frankal@unpri.org

The Principles for Responsible Investment (PRI)

The Principles for Responsible Investment, convened by UNEP FI and the UN Global Compact, was established as a framework to help investors achieve better long-term investment returns and sustainable markets through better analysis of environmental, social and governance issues in investment process and the exercise of responsible ownership practices. The Principles themselves, a full list of signatories and more information can be found at www.unpri.org

United Nations Environment Programme Finance Initiative (UNEP FI)
UNEP FI is a unique public-private partnership between UNEP and the global financial sector. UNEP works with over 170 banks, insurers and investment firms, and a range of partner organizations, to develop and promote linkages between sustainability and financial performance. Through its comprehensive work program encompassing research, training, events and regional activities, UNEP FI carries out its mission to identify, promote and realize the adoption of best environmental and sustainability practice at all levels of financial institution operations. More information: www.unepfi.org

UN Global Compact
Launched in 2000, the UN Global Compact brings business together with UN agencies, labor, civil society and governments to advance ten universal principles in the areas of human rights, labor, environment and anti-corruption. Through the power of collective action, the Global Compact seeks to mainstream these ten principles in business activities around the world and to catalyze actions in support of broader UN goals. With more than 5200 participating businesses from over 130 countries, it is the world's largest voluntary corporate sustainability initiative. More at: www.unglobalcompact.org.

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