The Principles for Responsible Investment has relaunched its reporting framework after a hiatus of over a year. Signatories to the UN-backed PRI will complete the annual questionnaire over a three-month reporting window from mid-May this year, and the PRI will analyse the responses to create assessment reports and scores for signatories.
This is a revision of the framework launched two years ago, which was used for the PRI’s most recent reporting cycle in the first quarter of 2021. Since then, the PRI has improved the clarity, consistency and applicability of the framework, and made 2023’s iteration more aligned with other industry frameworks and classifications, such as the TCFD, NZAOA and NZAM, the PRI’s chief reporting officer Cathrine Armour told New Private Markets.
The most recent reporting cycle was in the first quarter of 2021 and had introduced a framework and an online reporting platform that had been significantly changed from previous years. 2021’s framework and online platform had posed challenges and sparked criticism from many signatories: in a statement released today, the PRI says it received feedback that “focused on the need to improve clarity, consistency and applicability of the  framework” and alignment with other industry frameworks.
Several signatories told New Private Markets last year that they were unhappy with the outcomes- and data-based questions, saying they either did not have the relevant data, or they were afraid they would be scored poorly for certain sections. The PRI then cancelled the 2022 reporting cycle, and the newly launched framework is a revision of 2021’s iteration.
The questionnaire is optional for signatories that have joined the PRI since the previous reporting cycle and mandatory for those who joined prior to 2021. Private fund management giants that will be submitting their first mandatory reports include Ares Management, Brookfield Asset Management, Apollo Global Management and Vista Equity Partners – all of which joined in 2020.
The framework “focuses on process and practice, what evidence [signatories] are providing around that and demonstrating their activities”, said Armour. “We’re looking to give them insight into how they’re performing [in terms of] processes and practices around responsible investment and where there is opportunity for improvement.”
The scores provide “a mechanism [for signatories] to understand where they are in terms of responsible investment practices”.
The questionnaire has mandatory and optional modules organised by topic, asset class and strategy. Each signatory will be scored on the mandatory modules using a scale of one to five stars. Most questions are quantitative, yes/no or multiple choice: “[Signatories] would respond with the answer that most describes their level of practice and the approach they’re taking,” said Armour. “We’ve tried to take out the ambiguity and subjectivity.”
The framework does not measure or assess the real-world outcomes of signatories’ responsible investment practices and processes. “There are service providers that do that. What we’re providing is a transparency tool,” said Armour.
Frameworks for sustainable investment policies, asset management and measurement of performance and outcomes have flooded the financial services sector in recent years. Against this backdrop, the role of the PRI’s reporting framework is to establish consistencies across the sector, said Armour – so comparisons can be drawn between organisations employing different sustainability standards, practices and language.
The PRI will publish a ‘transparency’ report for each signatory in November 2023, which will cover their answers to the mandatory modules. “It is then up to the signatory themselves to reflect on [their scores and the transparency report] and how they might apply it within their own organisational context to improve their processes and practices,” said Armour. It can also be used “by those that are taking decisions on who they’re partnering or working with”, she added.
Signatories’ star scores – which are derived using weighting factors such as the signatory’s size and geography, as well as evaluations of the process or practice – will not be made public. The PRI is concerned that publishing signatories’ star scores may dissuade organisations from joining or remaining members of the PRI.
“I don’t think [mandatory publishing] is going to necessarily elicit the behaviours that we want,” said Armour. Low-scoring organisations “who are making efforts to improve their performance… might get a backlash… I’d rather retain their participation and their commitment to performance improvement than force the publication and see that impact their commitment to change”.