Unpacking PRI’s 2023 RI reporting data

Drawing insights from a robust pool of 2,859 investor signatories, the Principles for Responsible Investment’s (PRI) report offers a panoramic view of responsible investing (RI) practices’ global progression. It’s a narrative of growth, challenge, and the undeterred forward march of investors keen on embedding sustainability at the core of operations.

The journey from 2021 to 2023 has been marked by significant milestones. Investors have deepened their RI policies, with the data revealing an enhanced comprehensiveness across the board. During this time, fewer investors were overlooking climate-related risks and opportunities. The number fell from 20% to a praiseworthy 16%.Equally impressive is the rise in investors connecting their activities to sustainability outcomes, surging from 66% to 79%.

Yet the path hasn’t been without obstacles. Certain markets have shown resistance to RI practices, notably collaborative engagement. However, this hasn’t halted the RI movement’s overall progress, showcasing the resilience and commitment of the global investing community. We’ll circle back to the reasons behind these barriers, including resource constraints, later in this blog.

Asset owners vs. investment managers

The report uncovers intriguing dynamics between asset owners and investment managers. Asset owners are sprinting ahead, showing greater ambition and proactive action in RI than their investment manager counterparts. This includes a higher use of scenario analysis, a stronger focus on collaborative engagement, and a more pronounced alignment with the Paris Agreement to drive sustainability outcomes. Furthermore, asset owners lead in providing regular reporting on crucial RI aspects like human rights and climate change.

Asset owners are scrutinising their external investment managers more than ever, especially on how they weave material ESG factors into the investment process. While progress is notable, gaps remain, particularly in assessing passive strategy managers and monitoring stewardship activities like proxy voting.

Sustainability outcomes are a growing focus

The action on sustainability outcomes is burgeoning, with a significant uptick in signatories identifying and acting on these outcomes since 2021. The United Nations goals and frameworks remain pivotal in steering investor action, highlighting a collective move towards integrating sustainability deeper into investment strategies.

Biodiversity is climbing the priority ladder, with a fourfold increase in signatories outlining steps to safeguard nature in their leadership statements. This marks a watershed moment in recognising the intrinsic value of nature conservation within the investment sphere.

High ESG integration across asset classes

The report celebrates high levels of ESG integration across a diverse range of asset classes, signalling a mainstream acceptance and implementation of ESG considerations in investment analysis and decision-making processes.

But while the progress made so far is commendable, there are still many opportunities for improvement ahead. Engaging more deeply with public policy, refining the feedback loop to investment decision-making, and ensuring a lived commitment to RI principles stand out as important next steps. Moreover, overcoming resource constraints by optimising ESG data management strategies is essential for advancing RI practices.

Source: unpri.org

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