Agenda item

The Board received a presentation from representatives of Principles for Responsible Investment (PRI). The organisation sets global principles and monitors asset managers and asset owners in relation to these principles through investment strategy and implementation. City of London Corporation intends to sign up to the PRI on behalf of all its underlying capacities. The Board was advised the Corporation would be required to complete a detailed annual review on its activities that would be returned to PRI for evaluation. During the first year of membership, the annual review would be private, and feedback will be provided. In subsequent years the annual review would be made public.

The Board was given an overview of PRI and where the Corporation would fit in. PRI worked with an international network of around 2000 signatories to put six principles for responsible investment into practice. The organisation is investor-led and supported by the UN, with over US$80trillion dollars of assets currently under management, largely concentrated in Europe.

The PRI defined responsible investment as an approach to investing that aims to incorporate ESG factors into investment decisions, to better manage risk and generate sustainable, long-term returns. Key behaviours considered and expected of signatories centred around ESG integration, ESG screening and active ownership. The world was changing quickly and ESG factors could reveal macro trends, and help to identify the opportunities of the future.

The key expectation of being a PRI signatory was the year-on-year reporting on the implementation of the principles of responsible investment. As an outsource investor, the Corporation’s value would be in the selection and monitoring of fund managers. PRI would help the Corporation to identify ESG risks and pick up on future risks, in line with the market. The average reporting score of signatories had improved over the 8 years the model had been in use, and it was felt this showed the model of assessment was effective. The reporting and assessment was of great value as it forced signatories to look at their processes and identify improvements, as well as review performance in comparison to similar organisations, through private and peer review. The Board noted that a number of local authorities had already become signatories.

In response to questions from Members, the Board was advised that the main themes were climate action, looking at fixed income as an asset class, and looking generally at systemic risk. The scoring mechanism was useful for changing the behaviour of asset managers as it enabled comparison between peers, and enabled changes to the systems employed. The Board thanked PRI for their presentation and for their contributions to the meeting.

Members then discussed the PRI and the potential for the Corporation to become signatories. The basic approach, and PRI’s aims and themes were supported and Members were minded to move in that direction. There was some concern from Members about what information would go into the public domain. There would be 12 months following receipt of initial results to make improvements, should they be required and before anything was made public.

The Chamberlain advised the Board that the first phase after signing up would be about holding fund managers to account, which the Corporation were already doing.  A Member suggested that in becoming a signatory there was no obligation to invest into an ESG-specific type fund, rather it was an enhanced mind-set and a way of improving processes. The Board noted that engagement with fund managers had already begun through Mercer.

RESOLVED – That the presentation be noted.