Recent analysis from the PRI shows that investors are continuing to incorporate sustainability factors into their engagement with companies, building portfolios and reporting to clients
The Principles for Responsible Investment (PRI) recently published its analysis of trends in its 2024 signatory reporting data – which demonstrates that investors are continuing to engage on responsible investment issues such as climate related risks, governance, and human rights and social issues.
PRI’s 2024 annual reporting process saw 3,048 signatories – both asset owners and investment managers – report on their activity, with the data providing a comprehensive snapshot of the global landscape. These findings come against a changing political and regulatory backdrop in some markets. However, rather than ceasing their efforts entirely, investors continue to incorporate sustainability factors into their engagement with companies, building portfolios and reporting to clients.
Commenting on this report, David Atkin, CEO PRI, said: “Our data shows that the perception of an industry-wide shift away from responsible investment practices is overstated. The global sector fundamentally understands that core responsible investment principles help them make smart investment decisions and are good for their businesses. What we are seeing is that signatories are going back to basics, assessing their work and evolving it in line with the world around them.
“Our work with investors is and always has been about allowing them to gain better sight of the factors which could impact performance on the corporate balance sheet. We can say confidently that investors agree this work is vital, they’re keeping it up and that they’re seeing the benefit of it.”
Encouragement on multiple fronts
The report shows PRI signatories are continuing to include material issues – such as climate change and human rights – into the way they pick assets, build portfolios and engage with companies. Financial materiality is the key driver for this activity – with over 90% of investment managers having formalised processes to identify and incorporate material issues such as physical climate risks and human rights and social-related issues into decisions.
Encouragingly, on many metrics there is little change on actions on physical climate risks or human rights and social-related issues from the previous year’s data. 93% of signatories also formally assign oversight and accountability for RI (responsible investing) to their board members, senior executives or equivalents, demonstrating a clear focus from C-Suite leadership to use RI practices to address financially material risks.
Stewardship remains a widely undertaken activity among signatories. Stewardship actions by a large majority (84%) of signatories include incorporating sustainability issues such as climate related risk into proxy voting policies and guidelines.
Many signatories now undertake these activities across many asset classes – not just listed equities. 81% of signatories are conducting stewardship specifically in relation to their fixed income investments.
A further area of progress is in private markets. General Partners (GPs) increasingly recognise the need to address the challenges and opportunities within responsible investment. A high proportion of GPs now incorporate commitments within limited partnership agreements (or equivalents) as a default practice – 54% of private equity investors and 75% of infrastructure investors do so.
Asset owners (AO) continue to drive the agenda for the industry. The PRI data showed that asset owners are more likely than investment managers to take a longer-term approach to identifying climate-related risks and opportunities and to use climate scenario analysis (58% vs 29%).
Asset owners continue to expect their managers to engage in effective stewardship, with the proportion of AOs evaluating the proxy voting approaches of external Investment managers increasing from 74% in 2023 to 81% in 2024.
Click here to access the full report.