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UN PRI Revamps Reporting Rules to Focus on ‘Real-World’ Outcomes

Researchers have been critical of the UN stewardship code’s efficacy. New reporting requirements for investors will put more focus on outcomes.

The United Nations’ Principles for Responsible Investment has plans to update the way signatories report progress in 2021.  

This week the UN PRI announced that it will release in January new reporting requirements for signatories that are more focused on “real-world” outcomes. Alongside this, the PRI shared a new framework for institutions interested in investing with the UN’s sustainable development goals in mind. 

“I think this is another great initiative from UN PRI,” said Aaron Yoon, a researcher at Northwestern University, via email Monday. “However, there has to be a very clear monitoring mechanism that needs to be in place in order for any of this to work.” 

Yoon recently published a paper on the UN PRI that said asset managers who sign the stewardship code fail to show “meaningful improvements” in incorporating environmental, social, and governance factors into their investment strategies.  

“The PRI recognizes that urgent progress is needed if we are to meet global sustainability targets, such as the Paris climate agreement and the UN SDGs,” said PRI chief executive officer Fiona Reynolds via email Wednesday. She added that the PRI would consider Yoon’s research to inform the PRI’s work with signatories. 

According to Reynolds, the group has been consulting with its signatories since 2019 on revising its reporting requirements.  

The updated reporting requirements will include mandatory questions on processes used for identifying investment outcomes, Reynolds said. There will also be additional, voluntary questions on how signatories are trying to shape outcomes and how progress at these firms is being measured.  

At present, PRI signatories are required to report data on their investment activities, including sharing their responsible investment policy, which must cover more than half of assets under management. There must be a staff at these firms that focuses on implementing this policy, as well as accountability mechanisms in place, Institutional Investorpreviously reported. If these firms do not report data, they are delisted from the code. 

The UN designed its new sustainable development goals framework to help institutions align their investments with the outcomes it is seeking. These goals, released in 2015, include “no poverty,” “zero hunger,” and “gender equality,” the PRI’s website shows.   

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The framework has five parts. First, signatories should identify unintended outcomes from their current investments, it shows. Then, they should create policies and targets to reduce negative outcomes and encourage positive ones.   

This, according to the UN PRI’s announcement, will help investors shape outcomes, which in turn, will help financial systems shape “collective outcomes.” The final part of the framework is the collaboration of “global stakeholders” like businesses, governments, academics, and NGOs among others, to achieve these goals.   

“All actions of investors – investment decisions and use of tools of influence – shape positive and negative outcomes in the world,” Reynolds said via email. “Some may be unintended – some might also be unknown.”  

She added that the first part of the framework aims to help investors identify their part in these outcomes.   

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