Many asset managers proudly advertise their status as a UN PRI Signatory 🇺🇳.

We have often questioned this, given the 'minimum requirements' for this status are risible. Nonetheless, several thousand signatories go far beyond the minimum requirements and submit detailed annual reports, for grading by the PRI - and many investors value this highly.

But UN Principles for Responsible Investment reporting is about to change very significantly.

🗓️ 𝟮𝟬𝟮𝟱 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴, 𝘄𝗵𝗶𝗰𝗵 𝗼𝗽𝗲𝗻𝘀 𝗶𝗻 𝗠𝗮𝘆 𝘁𝗵𝗶𝘀 𝘆𝗲𝗮𝗿, 𝘄𝗶𝗹𝗹 𝗯𝗲 '𝗰𝗹𝗼𝘀𝗲𝗹𝘆 𝗮𝗹𝗶𝗴𝗻𝗲𝗱' 𝘁𝗼 𝗿𝗲𝗰𝗲𝗻𝘁 𝘆𝗲𝗮𝗿𝘀.

Yet the PRI also states that there will be some meaningful changes, to provide 'a bridge towards the introduction of Progression Pathways'.

🗓️ 𝗜𝗻 𝟮𝟬𝟮𝟲 𝘁𝗵𝗲 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 𝘄𝗶𝗹𝗹 𝗯𝗲 𝗿𝗲𝗽𝗹𝗮𝗰𝗲𝗱 𝗯𝘆 '𝗙𝗼𝘂𝗻𝗱𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴'.

This is a 'significantly streamlined' report that demonstrates one's commitment to the 6 Principles.

This will become the only mandatory report for signatories. Its precise format is a work-in-progress, as is 'Progressional Reporting', but all the language suggests it will be basic rather than detailed.

🗓️ 𝗙𝗿𝗼𝗺 𝟮𝟬𝟮𝟳 𝘁𝗵𝗲 𝗳𝗼𝗰𝘂𝘀 𝘄𝗶𝗹𝗹 𝗯𝗲 𝗼𝗻 𝘃𝗼𝗹𝘂𝗻𝘁𝗮𝗿𝘆 𝗿𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝘁𝗼 '𝗣𝗿𝗼𝗴𝗿𝗲𝘀𝘀𝗶𝗼𝗻 𝗣𝗮𝘁𝗵𝘄𝗮𝘆𝘀'.

These are pathways created by the PRI to help asset managers 'maximise returns by incorporating ESG factors'.

They choose their topics (e.g. 'setting sustainability targets' or 'engaging with investee companies'), and then choose whether to pursue Level 1, 2 or 3 ('introductory' to 'advanced') practices.

Signatories will be provided with materials and support to help instil those practices.

The PRI praises its move away from 'one size fits all' reporting, but the pick-and-choose nature of Progressional Reporting will significantly reduce investors' ability to compare the pathways of different asset managers.

𝗪𝗵𝘆 𝗵𝗮𝘀 𝘁𝗵𝗲 𝗣𝗥𝗜 𝗱𝗼𝗻𝗲 𝘁𝗵𝗶𝘀?

Whilst not entirely clear, it seems the PRI has no appetite to compete against the rise in other ESG reporting frameworks (ISSB, SFDR, TCFD etc). Its reporting framework has been beset by technical problems in recent years, and they now want to guide rather than police.

The risk to the UN PRI is that the value which asset allocators and asset owners place on being a Signatory, declines steeply next year.

𝗧𝗵𝗶𝘀 𝗮𝗿𝘁𝗶𝗰𝗹𝗲 𝘄𝗮𝘀 𝘄𝗿𝗶𝘁𝘁𝗲𝗻 𝗯𝘆 𝗜𝗻𝘁𝗲𝗴𝗿𝘂𝗺 𝗘𝗦𝗚 𝗙𝗼𝘂𝗻𝗱𝗲𝗿 𝗮𝗻𝗱 𝗖𝗘𝗢 𝗦𝗵𝗮𝗶 𝗛𝗶𝗹𝗹.

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