AO36, IM34 (respondents with external investments and excludes n/a results). AO40 (respondents with external investments and excludes n/a results).
AO39 (Modified - asset owner respondents with external investments only, excludes n/a responses) 22% of asset owner signatories currently consider responsible investment issues in selection processes of investment managers to a large extent and 44% do so to a small extent; another 13% plan to consider these issues in 2007.
AO36 (Modified - asset owner respondents with external investments only, excludes n/a responses) 45% of asset owners formally assess the extent to which integration of ESG by external fund managers is actually taking place. In some cases, signatories will ask managers to regularly report on responsible investment integration or will undertake periodic reviews to assess this. In other cases, they rely on third-party assessments of their managers.
AO70, IM77 (all respondents) A quarter of asset owners claim to have developed comprehensive engagement capabilities to ‘a large extent’. More than 15% of asset owners plan to increase the extent to which they engage on social and environmental issues during 2007 and more than 10% will increase their level of engagement activity in relation to governance.
AO78 IM85 (Modified, excludes n/a responses) More than half of PRI signatories are likely to have asked investee companies for standardised ESG reporting, while 10% plan to start in in 2007.
AO83 IM90 (Modified, excludes n/a responses) AO88 IM95 (Modified, excludes n/a responses) More than half of asset owner signatories made some reference to PRI-related requirements in requests for proposals, with another 23% planning to add PRI-related requirements in 2007. 18% of asset owner signatories are planning to ask their service providers to sign the PRI in 2007.
AO108 IM115 (Modified - excludes n/a responses) About three quarters of signatories disclose, at least to a small extent, how responsible investment (RI) or environmental, social and governance (ESG) issues are integrated into investment processes
AO118 (Modified - excludes n/a responses)
Best practice and first steps are listed for each principle Summary – No matter the size of your organization or your stage of implementation, there are opportunities to improve your implementation of RI.
Examples are scattered through out the report
This is what they will look like and how to read the chart The responses for each principle have been divided into four quartiles. The position of the yellow diamond can tell you both which quartile your organisation is in and the relative position of your organisation within that quartile. If there is no yellow diamond, your organisation did not provide enough answers to meet the scoring threshold for that Principle (many questions allowed a 'not applicable' answer and if there were too many of those a score is not provided).
04 July 2007 PRI Reporting and Assessment Tool Jane Ambachtsheer Global Head of Responsible Investment Mercer Investment Consulting Nada Villermain-Lécolier Global Head of Responsible Investment Strategy Fonds de Réserve pour les Retraites, FRR
PRI Reporting and Assessment Tool Agenda <ul><li>Overview </li></ul><ul><li>Results </li></ul><ul><li>Identifying Opportunities </li></ul><ul><li>Scoring </li></ul><ul><li>Looking Forward </li></ul>
Overview Process and timeline <ul><li>PRI Board decision: to provide signatories an assessment framework to report on their ability to implement PRI and a best practice guide </li></ul><ul><li>RFP procedure: 9 proposals were submitted in early October 2006. After analysis, and upon the assessment group recommendation, the Board has unanimously selected Mercer Investment Consulting to develop the project and create a flexible tool. </li></ul><ul><li>Universal Tool: Mercer team worked closely with PRI Secretariat, the PRI Assessment Working Group, and a range of experts from signatory and other organisations. The tool was ready and approved by the Board in January 2007. </li></ul><ul><li>Dematerialised tool: the online reporting interface was launched on PRI web site in February 2007, with final online submissions accepted until early May 2007. </li></ul>
Overview <ul><li>Tailored according to each principle: the questionnaire is divided into six different parts corresponding to the six principles. Each principle is scored independently </li></ul><ul><li>Capture responsible activities in 2006 and progress through 2007. Can also be used as a reference manual for signatories to use on an ongoing basis, as well as a resource for new signatories </li></ul><ul><li>First ever global undertaking that captures in significant detail if and how investors are integrating environmental, social and governance (ESG) issues within investment decision making and ownership practices and the extend to which there are working together and communicating about their responsible strategy. </li></ul>
Overview <ul><li>Satisfying response rate in year one: </li></ul><ul><ul><li>The questionnaire was completed by 106 signatories </li></ul></ul><ul><ul><ul><li>62 asset owners out of 73 invited to participate </li></ul></ul></ul><ul><ul><ul><li>44 investment managers out of 64 invited to participate </li></ul></ul></ul><ul><ul><li>Overall response rate of 77% (75% of PRI AUM) </li></ul></ul><ul><ul><li>Asset owner response rate of 85% </li></ul></ul><ul><ul><li>Investment manger response rate of 69% </li></ul></ul>
Overview Assessment Working Group <ul><li>Wilco van Heteren, PGGM Investments </li></ul><ul><li>Marcel Jeucken, PGGM Investments </li></ul><ul><li>Peter Lunt, VicSuper </li></ul><ul><li>Donald MacDonald, British Telecommunications Pension Scheme </li></ul><ul><li>Marie-Claude Provost, Caisse de dépôt et placement du Québec </li></ul><ul><li>Laetitia Tankwe, Comité syndical national de retraite Bâtirente </li></ul><ul><li>Nada Villermain-Lecolier, Fonds de réserve pour les retraites (FRR) </li></ul>
Results – Overall <ul><li>Signatories to the PRI are taking their commitments to implementing the six Principles seriously </li></ul><ul><li>Signatories have performed best in implementing Principles 1 (ESG integration) and 2 (active ownership). Implementation of the other Principles is not as progressed </li></ul><ul><li>The top performers in implementing Principles 4 through 6 tend to have the widest range of scores, which may indicate that a wide variety of approaches are being employed by the leading signatories in these areas </li></ul><ul><li>Investment managers perform better than asset owners overall, and signatories from North America and Europe have the strongest performance by region </li></ul>
Results – Overall <ul><li>ESG integration focuses on listed equity, although many signatories plan to extend integration to private equity, real estate and fixed income in 2007 </li></ul><ul><li>The vast majority of signatories are involved in collaborative engagement initiatives </li></ul><ul><li>Less than half of asset owners have assessed the extent to which their external investment managers integrate ESG issues into investment decision making </li></ul><ul><li>43% of asset owners indicated that their consultants do not factor in responsible investment or ESG issues when short listing fund managers </li></ul>
Results – Principle 1 Responsible investment policy statements <ul><li>Do you have a formal investment policy statement that makes specific reference to the integration of responsible investment (RI)/environmental, social and governance (ESG) issues within investment decision making and ownership practices? </li></ul>
Results – Principle 1 Specialist staff <ul><li>Do you have any specialist staff solely dedicated to RI/ESG issue analysis? </li></ul>
Results – Principle 1 ESG considerations when selecting external investment managers <ul><li>Does your fund take RI/ESG considerations into account when selecting and approving fund managers? </li></ul>
Results – Principle 1 Assessing external investment managers on ESG issues <ul><li>Have you assessed your external investment managers on the extent to which they are integrating RI/ESG issue analysis into investment decision making? </li></ul>
Results – Principle 2 Proxy voting <ul><li>PRI signatories regard proxy voting as an important engagement tool </li></ul><ul><li>All PRI investment managers are involved in voting to some extent, and 93% have a voting policy. The high level of attention paid to voting by investment managers is also reflected in the fact that 85% conduct proxy voting on behalf of their clients and 78% can execute client-specific voting programmes. </li></ul><ul><li>To what extent did you employ proxy voting in your 2006 engagement strategy? </li></ul>
Results – Principle 2 Engagement on ESG issues <ul><li>To what extent have you developed a comprehensive RI/ESG engagement capability? </li></ul>
Results – Principle 3 Asking for standardized RI/ESG issue reporting <ul><li>Have you asked that investee companies (or other investment entities) produce standardized reporting on their RI/ESG issue performance (within annual financial reports or other formats)? </li></ul>
Results – Principle 4 The PRI and service providers <ul><li>Are you including PRI-related requirements in RFPs? </li></ul><ul><li>Have you asked your service providers to sign the PRI? </li></ul>
Scoring <ul><li>The framework was designed to assist signatories in assessment as well as reporting. Many questions in the Reporting and Assessment Tool were scored, with each answer assigned a different score </li></ul><ul><li>For each Principle, signatory scores were ranked relative to their asset owner or investment manager peers, with signatories being placed in one of four groups per Principle </li></ul><ul><li>Because there are no absolute performance standards in the PRI, most questions also allowed a ‘not applicable’ option that would not reduce a signatory’s score </li></ul><ul><li>Individual results will be sent to PRI contacts at signatory organisations shortly after this annual meeting </li></ul>
Scoring <ul><li>The aggregate scoring outcome will allow the PRI to demonstrate the robust nature of the initiative and the progress achieved by signatories </li></ul><ul><li>The development of relevant and accurate metrics is a difficult and iterative process. This year’s assessment is the beginning of an ongoing annual process that will be improved over time </li></ul>
Scoring Your organisation's score Top quartile Median Bottom quartile
Looking Forward Barriers <ul><li>Signatories continue to face practical and cultural barriers to further PRI implementation </li></ul><ul><li>According to many signatories, the tools and the conditions required to make use of the Principles have yet to fully emerge </li></ul><ul><li>The major barriers identified by signatories revolve around resource considerations, insufficient research inputs and unsupportive operating environments </li></ul><ul><li>There is a deficiency in mainstream, quantitative and historical performance attribution data - Improved metrics and analytical frameworks are required to sufficiently demonstrate performance that results from integrating ESG in investment processes </li></ul>
Looking Forward Goals and aspirations <ul><li>‘ Push the ongoing integration of ESG issues within equity, credit and fixed income research, and thus within the investment process’ </li></ul><ul><li>‘ Help build the case for materiality of ESG factors’ </li></ul><ul><li>‘ Interact with national and supranational authorities in questions related to long-term environmental changes and liabilities’ </li></ul><ul><li>‘ Work with others where possible to promote wider acceptance of, and support for, responsible investment and to encourage others to adopt the PRI’ </li></ul><ul><li>‘ Participate in a successful clearinghouse engagement’ </li></ul>
Looking Forward Beyond 2007 <ul><li>Many signatories responded that they are ‘Planning to in 2007’ for many questions – next year’s report will demonstrate this progress </li></ul><ul><li>The preparation for next year’s implementation of the Reporting and Assessment Tool will begin in September and it will likely launch near the beginning of 2008 </li></ul><ul><li>Please share your ideas for next year and help ensure the PRI Reporting and Assessment Tool is as beneficial as possible for signatories </li></ul><ul><ul><li>For example: Employ a user ID and password for each signatory, make it easier to print the responses, etc. </li></ul></ul>
Contact information <ul><li>Mercer Investment Consulting </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>+1 416-868-2659 </li></ul></ul><ul><li>PRI Secretariat </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>www.unpri.org </li></ul></ul><ul><li>The full set of aggregate data will be available on the PRI website at www.unpri.org/report07 </li></ul>
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