Archive for August, 2009|Monthly archive page

UN Principles for Responsible Investment (PRI)

The UN Principles for Responsible Investment (PRI) were issued in 2006. The PRI were developed by an international group of institutional investors reflecting the increasing relevance of environmental, social and corporate governance issues to investment practices. The process was convened by the United Nations Secretary-General.  The PRI state: “As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society”.

Signatories to the PRI commit to incorporating ESG issues into investment analysis and decision-making processes; being active owners and incorporating ESG issues into ownership policies and practice; seeking appropriate disclosure on ESG issues by the entities in which they invest; promoting acceptance and implementation of the Principles within the investment industry; working together to enhance their effectiveness in implementing the Principles and reporting on their activities and progress towards implementing the Principles.

PRI Report on Progress (2008)

The ‘PRI Report on Progress 2008’ was published.  The report highlights progress made to date, special initiatives that have been undertaken, and areas for improvement.  Interestingly the PRI encourages signatories to disclose their responses to the annual Reporting and Assessment survey, and every year a number of signatories agree to make their responses publicly available.  The responses can be viewed at:

One of the questions on the annual Reporting and Assessment survey asks respondents to rank the six principles on the level of difficulty of implementation of the principles.

There are currently 574 signatories to the Principles, comprising 183 asset owners, 282 investment managers, and 109 professional service partners. 

Aviva Investors is one of the signatories and their Head of Research and Engagement, Steve Waygood is quoted as saying: “There is now a critical mass of institutional investors who believe management of corporate responsibility or ESG issues is highly relevant to the long-term financial success of their investments”.

UN PRI Delists Members

The UN PRI recently delisted five of its signatories after they failed to report on their activities.  Sophia Grene (FTfm Page 6, 24th August 09) in her article ‘UN Principles need sharper teeth’ states ‘it is a significant step forward for the UNPRI to demonstrate there are consequences to treating the principles as nothing but a brand-enhancer’.

Concluding thoughts

The UN PRI have taken some clear steps to hold its members (signatories) to account.  The UN PRI are also working on a transparency framework which, according to Grene, will give  ‘clients, customers, members and other stakeholders…a clear sense of their responsible investment processes, activities and capabilities’.   It will be interesting to see how the UN PRI evolve over time given the growing interest in this area.

Chris Mallin 24th August  2009

Oxley of the SOX Act to chair business ethics group

Oxley, of the Sarbannes Oxley Act, to chair business ethics group

When, following the Enron debacle, Senator Sarbannes and Congressman Oxley co-sponsored the United States Sarbanes-Oxley Act (SOX) in 2002 their names, previously unknown outside America, became enshrined forever in the archives of international corporate governance.  The landmark Sarbanes-Oxley Act may have restored Americans’ confidence in the capital markets and in the process created a new accounting oversight board for publicly traded companies.

But what we had comfortably been calling the Anglo-American approach to corporate governance was shattered.  America now required corporate governance by the rule of law (obey the law or risk the consequences), whilst the UK and the Commonwealth countries, such as Australia, New Zealand, Canada, India, South Africa and many other jurisdictions still relied on self-governance (follow the corporate governance code or explain why you have not).

After a 25-year Congressional career, Michael G. Oxley has now retired from Congress, but maintains his interest in corporate governance.  Currently counsel in the Washington, D.C. office of Baker Hostetler and senior advisor to the board of NASDAQ, he has just been elected chairman of the board of directors of the Ethics Resource Center (ERC) – see  ERC is America’s oldest nonprofit, nonpartisan research organization devoted to business ethics and ethics in the workplace.

“I am proud to have been selected as the chairman of the board of the Ethics Resource Center, and I am excited by the opportunity to contribute to its mission,” Oxley said. “ERC is devoted to the study and practice of organizational ethics, a topic that has been at the forefront of my work for nearly a decade.”

Maybe business ethics is the new frontier of corporate governance.