PRI’s updated framework a challenge for responsible investors

Steffan Berridge

The United Nations Principles of Responsible Investment (PRI) has announced sweeping changes to its reporting framework.

Elina Rolfe, PRI director of reporting and assessment said in a statement: “We need to ensure that being a PRI signatory remains meaningful for the industry. We are not here to be a rubber stamp. That is why we decided to review the reporting process and our framework to ensure it remains relevant in a continuously evolving market.

“We’ve been working hard over the last two years to develop a framework that not only has more challenging reporting requirements, but is also simpler for signatories to report on, shorter and more consistent in its structure; and one that delivers more flexible and meaningful reporting outputs.”

The number of questions that PRI signatories will need to answer has been halved. At the same time the reporting requirements have become more challenging, making the higher ratings more difficult to achieve.

Steffan Berridge, head of quantitative strategy at Kiwi Wealth says, “We are enthusiastic that PRI are strengthening their standards. Being a signatory doesn’t carry any weight if just anyone can do it.”

While Berridge is happy to see these changes made, he says it does make his job more difficult. In their first PRI assessment earlier this year Kiwi Wealth were awarded top marks with an A+ rating.

Berridge says, “It’s good that the standards are going higher, but it does make it more difficult for us. There is a real possibility that scores go backwards in the short term. We have had a top grade for strategy and governance in the first year but it’s likely that it's going to go backwards.

“I have talked to others in the industry who are also saying that they are expecting scores to go down. It’s not because they are doing anything less, it’s because the standards have gone up. We are definitely going to see a bit of catch up which will drive improvement and practices, which has got to be a good thing.”

Berridge says that for responsible investment trends to continue, change needs to be coming not just from global investor initiatives like PRI.

“Progress has to be pushed from all directions. In the end what fund managers in New Zealand are doing comes down to regulation, client demand, and public perception. PRI does have a public importance, but its importance is much more important in a wholesale market than retail.

“The person on the street may not know what PRI is, whereas big trusts and iwi won’t even let you in the door unless you are a signatory. From that perspective it’s serious stuff.”