Adrian Bertrand
Principles for Responsible Investment
Responsible Investment
An investor initiative
in partnership with
Responsible Investment
31 August 2016
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R E S P O N S I B L E
I N V E S T M E N T
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ESG ISSUES & SHAREHOLDER VALUE
INVESTMENT VALUE CHAIN & RI
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Reporting requirements
Stock exchange standards
Stewardship codes
Fiduciary duty
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Increased attention
and engagement
Demand for ESGthemed products
Ethical motivations
Focus on solid, longterm returns
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Executive summary
The PRI at a glance
Why responsible investment?
Risk management and due
diligence
Informed asset allocation
Impact on financial markets
Demand for ESG-themed products
Recognition of responsible
investment as best practice
Competitive advantage*
Ethical motivations
Reputational risks and
opportunities
Enhanced staff satisfaction
Value Proposition
PRI services
Your dedicated PRI team
RESPONSIBLE INVESTMENT IN SA
REGULATORY CHANGES IN SOUTH AFRICA – REG. 28
• Pension Funds Act 1956. Preamble to Reg. 28:
• ‘A fund has a fiduciary duty to act in the best interest of its members whose benefits depend on the
responsible management of fund assets. This duty supports the adoption of a responsible investment
approach to deploying capital into markets that will earn adequate risk adjusted returns suitable for the
fund’s specific member profile, liquidity needs and liabilities. Prudent investing should give appropriate
consideration to any factor which may materially affect the sustainable long-term performance of a
fund’s assets, including factors of an environmental, social and governance character. This concept
applies across all assets and categories of assets and should promote the interests of a fund in a stable
and transparent environment.’
• Reg. 28 Principles:
• 2)(c) A fund and its board must at all times apply the following principles:• 2)(c)(iii) in contracting services to the fund or its board, consider the need to promote broad-based black
economic empowerment of those providing services;
• 2)(c)(ix) before making an investment in and while invested in an asset consider any factor which may
materially affect the sustainable long term performance of the asset including, but not limited to, those
of an environmental, social and governance character
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
Your dedicated PRI team
RESPONSIBLE INVESTMENT IN SA
REGULATORY CHANGES IN SOUTH AFRICA – PF 130
• Section 14.8 of PF130 deals with Responsible
Investment, and suggests that:
• “….funds should consider socially responsible investments. Boards of
funds should consider how shareholder activism can be applied to
promote good governance and citizenship in companies in which their
funds are already invested.
• Such activities may actually enhance the performance of the companies and
therefore the returns of the fund. It is recommended that [Boards] of funds
apply their minds to formulating a suitable policy regarding such
investments as well as incorporating shareholder activism into their
investment mandates.”
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
Your dedicated PRI team
RESPONSIBLE INVESTMENT IN SA
REGULATORY CHANGES IN SOUTH AFRICA – CRISA
• Guidance on how institutional investors in SA should:
 execute investment analysis and investment activities;
 exercise rights so as to promote sound governance;
 Based on 5 Principles;
 Listed equities focus;
 Public reporting obligations i.e. proxy voting
CRISA’s 5 Principles
PRI’s 6 Principles
1. Incorporation of ESG
1. Incorporation of ESG
2. Active Ownership
2. Active Ownership
3. Disclosure
4. Promotion
3. Collaboration
5. Collaboration
4. Conflict of interest
5. Disclosure
Executive summary
The PRI at a glance
Why responsible investment?
6. Reporting
Value Proposition
PRI services
Your dedicated PRI team
THE PRI AND THE SIX PRINCIPLES
• The PRI works with its international network of
signatories to put the six Principles for Responsible
Investment into practice. Its goals are to understand the
investment implications of environmental, social and
governance issues and to support signatories in
integrating these issues into investment and ownership
decisions.
• The six Principles were developed by investors and are
supported by the UN. They have more than 1,500
signatories from over 50 countries representing more
than US$60 trillion of assets.
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1544
The six Principles for Responsible Investment:
>60
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
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PRI IS INVESTOR-LED
MANAGE RISKS, ENHANCE RETURNS, BETTER FULFIL FIDUCIARY DUTY
PERFORMANCE
NOT PHILANTHROPY
“The high-sustainability
companies dramatically
outperformed the lowsustainability ones in terms of
both stock market and
accounting measures.”
Harvard Business School
RISK MANAGEMENT
NOT BREACH OF
FIDUCIARY DUTY
RETURNS
NOT SACRIFICE
“There are statistically
significant positive abnormal
returns associated with going
long good corporate governance
firms and shorting those with
poor governance.”
Yale School of Management
DIVERSE APPROACHES
“The links between ESG factors
and financial performance are
increasingly being recognised.
On that basis, integrating ESG
considerations into an
investment analysis so as to
more reliably predict financial
performance is clearly
permissible and is arguably
required in all jurisdictions.”
Freshfields Bruckhaus
Deringer
NOT JUST EXCLUDING UNETHICAL INVESTMENTS
“We believe that ESG analysis should be built into the investment
processes of every serious investor and into the corporate strategy of
every company that cares about shareholder value.”
Deutsche Bank
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
Your dedicated PRI team
SUGGESTED RI APPROACH
SUGGESTED ACTIONS PER REG. 28, CRISA, PF 130 AND PRI
Integration of ESG
 Investment Policy Statement / Statement of Investment Beliefs etc.
 RI Policy
 RI implementation approach – fund manager and service provider mandates
 RI monitoring & evaluation
Active ownership
 RI Policy / Active ownership policy / Proxy voting policy etc.
 Active ownership approach – fund manager and service provider mandates
 Engagement with investee companies and other stakeholders as necessary
 Active ownership monitoring & evaluation
Accountability
 Annual reporting on integration of ESG and active ownership activities;
i.e. proxy voting disclosure
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
Your dedicated PRI team
FURTHER DRIVERS FOR RI IN SA
RECENT DEVELOPMENTS
 Integrated Reporting
 King IV & King IV Retirement Funds Sector Supplement
 Retirement Reform initiatives by National Treasury
 Professionalization of Principal Executive Officers of pension
funds
 Professionalization of pension fund trustees
 Increasing awareness of ESG issues by pension members and
beneficiaries
 Role of social media in raising fund member grievances publicly
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
Your dedicated PRI team
SOME TAKE-AWAYS
WHAT CAN YOU DO TO SUPPORT UPTAKE OF RI IN SA?
 Facilitate pro-active meaningful engagement between companies and their
shareholders;
 Facilitate pro-active meaningful engagement between companies and their
stakeholders;
 Report on material ESG issues via an annual integrated report, sustainability
report, &/or report on sustainability data points publicly using appropriate
standards & methodology
 Ask your corporate pension fund / plan sponsor how the fund is addressing
ESG issues as part of its investment decision making?
 Engage your principal executive officer / trustee representative / HR executive
to advise on how the fund applies Reg. 28, PF 130, CRISA and PRI principles
 For any retail investment products that you might have – ask your financial
advisor how ESG issues are taken into account with regards your own private
investment portfolio / product?
 Sign up for the PRI Academy online courses in RI!
More info: http://priacademy.org/
Executive summary
The PRI at a glance
Why responsible investment?
Value Proposition
PRI services
Your dedicated PRI team
Adrian Bertrand
(e) adrian.bertrand@unpri.org
(c) +27(0)845006474
www.unpri.org