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November 15, 2012

Assets of PRI Signatories Exceed $32 Trillion
    by Robert Kropp

With 254 new signatories to the Principles for Responsible Investment, the number now exceeds 1,100, even as 61 former signatories are delisted.

SocialFunds.com -- The United Nations' Principles for Responsible Investment (PRI) is surely one of the largest sustainable investment initiatives in the world. Earlier this year, PRI announced that the number of institutional investors committing to the six principles had exceeded 1,000.

PRI recently published its annual lists of new and delisted signatories. Despite a handful of delistings, the number of signatories now stands at more than 1,100 with assets under management in excess of $32 trillion.

Forty-one US-based organizations are among the signatories added over the past 14 months, bringing the total from the US to 156. Twenty-one are asset owners, while 110 are investment managers and 25 are professional service partners.

"Being a PRI signatory has become critically important—and some would argue a license to operate—in key markets," the Boston-based State Street Global Advisors (SSgA) announced when it joined the initiative earlier this year. "PRI has pushed the ESG (environmental, social, and corporate governance) agenda to the forefront, and as the initiative builds to a critical mass, it is likely that PRI will cement its place as the global standard for sustainable and responsible investing."

In 2011, SSgA launched a High Quality Green Bond strategy to invest in green bonds issued by supranational or multilateral development banks. The fixed income investment product focuses on green bonds issued primarily by institutions such as the World Bank and the European Investment Bank (EIB), that allocate their proceeds to fund environmentally beneficial development projects.

Goldman Sachs Asset Management (GSAM), the fund management division of Goldman Sachs, is another new US-based signatory. "We are committed to responsible and sustainable investing and are working to further integrate ESG principles into investment strategies and client solutions globally," the firm stated. "We believe responsible and sustainable investing extends beyond the evaluation of quantitative factors and traditional fundamental analysis. Where material, it should include the analysis of an entity’s impact on its stakeholders, the environment and society."

There are those who question the effectiveness of PRI's aspirational approach to the uptake by its signatories of the principles. In a recent article, Matthew Kiernan, the founder of Innovest Strategic Value Advisors, wrote, "Major investors do not, in practice, pay much attention at all to companies’ environmental performance. As a result, the entire argument falls apart, and excellent work by organizations including the UN Environment Program Finance Initiative and the UN Principles for Responsible Investment falls well short of its considerable potential impact."

For example, while GSAM has signed onto the principles, its parent company continues to finance mountaintop removal (MTR) coal mining and coal-fired power generation projects. Goldman Sachs does business with the two largest MTR companies, and "is both the owner of a coal plant operating utility company and a significant financer of the majority of utility companies on our risk list," according to the authors of the most recent coal finance report card .

And while one of the principles specifically addresses the importance of corporate engagement on ESG issues, two US-based signatories—BlackRock and AllianceBernstein—supported fewer than five percent of the climate resolutions on which they voted in 2011, according to an assessment by Fund Votes.

PRI delisted 61 signatories in the past year, but it is unclear to what extent failing to implement the principles had a role. "Signatories are delisted if they do not pay the mandatory annual membership fee or participate in the annual reporting and assessment process, or if they choose to voluntarily leave the Initiative," PRI stated. "However, no signatory was delisted during the period for failing to report, as this process was voluntary this year."

Reporting by signatories is expected to become mandatory with the implementation of the new PRI Reporting Framework.

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