The United Nations-backed Principles for Responsible Investment (PRI) has announced that it will delist asset managers and other signatories who do not live up to the environmental, social and governance (ESG) criteria they have committed to.
The decision was made at the PRI Signatory General Meeting held in Singapore in September 2016, over concerns that some of the 1,500 institutional investors who have signed up to the six principles are merely paying lip service to them. Commenting on the decision to bring in a delisting process, PRI managing director, Fiona Reynolds, said: “It is designed to delist the worst offenders, who have signed the principles primarily for marketing purposes or to secure mandates, but have no intention to progress.”
Under the delisting process, those at risk of losing PRI signatory status will be placed on a confidential watch list. If their support for the ESG principles does not improve within two years, there will be publicly identified and delisted, subject to an appeals process. At present, many asset owners, including UK pension funds, require asset managers to be PRI signatories in order to be considered for investment mandates. However, the PRI itself has been criticised in the past; in 2013, several Danish investors, including the giant ATP fund, quit the PRI due to concerns about the organisation. Large asset managers with PRI signatory status, including Vanguard and BlackRock, were recently criticised by ESG activists over their opposition to a shareholder resolution which would have required oil firm Exxon to disclose its ability to withstand measures to limit global warming by reducing carbon emissions.