What Are the UN-Supported Principles of Responsible Investment (PRI) 

What Are the UN-Supported Principles of Responsible Investment (PRI) 

– By Shea Karssing

February 5, 2024

Incorporating ESG Into Investments Through PRI 

The Principles of Responsible Investment (PRI) are a range of principles created by investors for investors. These principles were convened by the UN Secretary General Kofi Annan – and they are separate to, but supported by, the organisation.  

They aim to create a more sustainable global financial system by incorporating environmental, social, and corporate governance (ESG) into investment. By uniformly weaving ESG into the fabric of global investment practices, positive environmental, social, and investment outcomes are generated. 

This links sustainability with strategy for businesses. Long-term investors impact stock performance over time. These investors need clarity on the business case for ESG – the risks, opportunities, and long-term implementation of ESG practices to companies and industries. Legacy reporting on ESG is often insufficient on this front. That is where the standardising effect of PRI principles and reporting stands to have the deepest social and environmental impact. It also provides clarity on risks and returns for investors. 

What is responsible investment? 

Responsible investment is the incorporation of ESG principles in investment decision-making. For some investors, this is done purely to gauge the impact of ESG factors on financial returns. For others, the social and environmental benefits are equally important concerns to a responsible investment approach. 

Why responsible investment is important 

Engagement on ESG issues with companies and businesses presents a range of potential benefits for investors. This includes robust regulatory outlook and performance, as well as risk mitigation. Additionally, empirical studies have confirmed the business case for ESG, confirming that companies with strong ESG policies tend to perform better financially.  

ESG and responsible investment are also the subject of growing regulatory focus. Growing global mandatory ESG reporting and voluntary frameworks are a sign of the times. This makes ESG a fundamental consideration for investment portfolios – and it is likely that this will continue into the future.  

In a similar vein, ESG has become an issue of public concern. These principles are the subject of growing importance to customers and suppliers. It has become expected that investors will consider ESG and sustainability impacts and incorporate the values and aims of the Sustainable Development Goals into investment practices.  

ESG impacts the financial return on investments – and this requires them to be considered in the performance of fiduciary duty in investment practices.  

What is the PRI in ESG? 

The PRI was launched by Kofi Annan in 2006 to strengthen ESG among the world’s investors. At the end of the first quarter of 2023, there were 5 381 signatories to the PRI. These are participants who made voluntary disclosures and adhere to six PRI principles that guide more sustainable returns and responsible social and environmental practices within global investing. ESG considerations are central to risk and return and the PRI contributes to standardising and enhancing transparency around these issues. 

What are the requirements for PRI? 

Asset owners and investment managers need to meet certain minimum requirements when reporting to the PRI. This includes a responsible investment policy for ESG issues for 50% of assets under management, oversight requirements, and implementation of the responsible investment policy through the collection of data, engagement with stakeholders, and the development of ESG strategies. 

What is the difference between PRI and GRI? 

The Global Reporting Initiative (GRI) is the world’s largest body for sustainability reporting. The PRI deals with responsible investing. The two sets of standards and principles complement each other in guiding organisations toward more transparent, sustainability-driven ESG and CSR reporting. Similarly, the Task Force on Climate-Related Financial Disclosures (TCFD) – now taken over by the International Sustainability Standards Board (ISSB) – align with the PRI on environmental standards and disclosures. 

How smart technologies simplify ESG reporting for PRI 

Smart technologies digitally transform ESG reporting through data. This removes issues around poor-quality ESG reporting and simplifies monitoring and reporting on the metrics that matter. For companies and individual sectors, digital transformation is an intrinsic part of future-proofing ESG processes, protocols, and reporting.  

ESG and resilience 

ESG is the subject of much regulatory change around the world. Evolving mandatory and voluntary standards make this a strategic imperative for business and financial investment. One of the appeals of strong ESG policies is the resilience and flexibility of these operations in the face of changing regulatory landscapes.  

Smart technologies provide data insights that inspire accurate forecasting, precision management, and comprehensive compliance solutions. Through granular understanding of key metrics over time, factors that impact environmental and social performance are better understood. This allows for realistic and attainable benchmarking and performance monitoring as time progresses. 

Smart buildings, the environment, and ESG 

Smart buildings support ESG initiatives in various ways. For building owners, smart building functionality is desirable for the benefits it brings to tenants. For businesses, these smart building environments enhance ESG in different ways.  

Smart energy management 

The built environment is notoriously energy intensive. Smart buildings present a menu of energy efficiency opportunities for smart energy management. By understanding detailed consumption data, businesses are able to identify areas of potential savings, strategise around peak usage, and optimise energy management and efficiencies. Smart metering solutions make this attainable for water, gas, and electricity. 

The data insights from smart energy monitoring also guides better decision-making for energy management. For example, it guides the least disruptive path to the shift to renewables. These data insights also connect consumption to assets, showing equipment efficiency issues. 

At an individual building level, smart utilities have the potential to automate around building occupancy when it comes to lighting, heating, and cooling. This means a more responsive, comfortable place to work – but also one that is minimally and intuitively resource intensive.  

Smarter, safer places to work  

Various data sets impact tenancy wellbeing, safety, and security. By monitoring data around air quality, temperature, occupancy, waste, and water safety issues like legionella, the safety and comfort of individuals within buildings is more effectively safeguarded.  

Digital transformation for traceable, transparent ESG reporting 

Operational data is the core component of effective ESG reporting. Smarter Technologies Group’s smart building solutions are focused on cybersecurity in providing these advanced digital tools for business and industry.  

Implement smart building solutions for ESG and PRI with Smarter Technologies Group 

Contact Smarter Technologies Group today to find out more about our tailored smart solutions. 

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