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Your investment manager is a PRI signatory, which should comfort you on their "commitment...

...to responsible investment” captured in the PRI’s Manager Declaration and six commitments to ESG.

If it’s a US headquartered asset manager signatory, according to this recent study, it should not comfort you, as their research “raises concerns about greenwashing among US PRI signatories.”

PRI was launched in 2006 , and “has grown to be the largest investor initiative worldwide, with close to 4,000 signatories and over US$120 trillion of AUM.” Using PRI membership, publicly available portfolio holdings and blended ESG ratings from three providers analyzed over time, the authors find:

“…only PRI signatories located outside of the USA have better portfolio ESG scores than nonsignatory investors.”

“More concerning, perhaps, we find that US-domiciled PRI signatories that do not report any form of ESG incorporation … have significantly worse portfolio ESG scores than non-PRI institutions.”

One reason given for the US observation is that US asset managers own lower ESG rated companies then employ company engagement (proxy voting, etc.) to encourage better company behavior. They authors look at this and find

“Our analysis, however, suggests that this is unlikely to be the case. First, the PRI survey data reveal that US investors report significantly less usage of individual or collective ESG shareholder engagement than their peers from other geographical regions. Second, we also find evidence that the US PRI institutions that report that they engage on ESG with their portfolios firms do not exhibit better portfolio ESG scores in subsequent years.”

Further the authors find US asset managers use the PRI for business development, as their analysis showed a meaningful increase in asset growth after becoming a Signatory, and further, they find that US asset managers are more likely to become a Signatory after a period of underperformance---

“The relation between past underperformance and greenwashing (as measured by having low portfolio ESG scores and being in the PRI) suggests that institutions might use the PRI label to countervail their subpar investment performance, while not deploying resources toward implementing ESG practices.”

For those in Europe: “asset allocators considering investment managers should care about whether an investment manager is a signatory or not, at least when the manager is located outside of the USA.”

Buyer beware, in the US. FaithInvest is here to help.

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Disclaimer

FaithInvest is an international nonprofit organisation that empowers faith groups to invest in line with their beliefs and values. FaithInvest is not authorised by the Financial Conduct Authority and does not provide financial or investment advice. Information provided on FaithInvest’s website or its other communication channels does not constitute financial or investment advice. If you wish to receive any form of financial or investment advice, please consult a qualified and independent financial advisor. You should conduct your own due diligence in relation to any investment opportunities or strategies you choose to pursue. FaithInvest does not promote any specific investments or opportunities and cannot therefore accept responsibility for any specific financial or investment decisions you make following participation on its website platform.

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