Has France’s groundbreaking ESG disclosure law put iron in the soul of its institutional investors? If the proceedings of the 1 June Blueprint for Responsible Investment workshop in Paris are any indication, it seems that policy innovation has encouraged responsible investment leaders to seek to raise the bar yet further.
PRI was in Paris as part of our globe-trotting consultation exercise this summer, seeking signatory feedback on our planned Blueprint, which will set out our roadmap for the next decade.
On many of the questions under consideration, attendees took a tough line: all signatories should report on their progress towards meeting the Principles; back-sliders should be delisted; the scandal-hit suspended.
French signatories felt particularly strongly about defending the PRI’s brand against reputational damage. Those at the workshop declared themselves “sensitive to the quality of the membership,” and supported proposals to delist signatories that failed to demonstrate how they are implementing the Principles (within a reasonable time-frame, of perhaps two years). They also advocated the immediate suspension of any signatory involved in a major scandal, while the facts are investigated.
Attendees were also vocal in their support for disclosure and transparency. They advocated reporting by all signatories, regardless of size and including associate members, and believe that the signatory assessment scores should be made public. This would make it easier to track progress on implementation.
Perhaps French signatories have been influenced by their domestic policy environment. Last year, France introduced its Energy Transition & Green Growth Law. Article 173 requires French institutional investors to disclose, in their annual reports, how their investment decision-making processes take ESG factors into consideration and, in addition, their exposure to climate change risk.
A focus on disclosure certainly appears to have triggered a willingness to raise the bar. Attendees were supportive of a ‘gold tier’ of PRI membership, and one that should be highly exclusive – restricted to no more than 5% of signatories.
They were also mindful of the wider financial system risks faced by investors – and backed proposals, set out in the PRI’s recently launched consultation, to update the Principles to make explicit the responsibility of investors to address these systemic risks.
But they also noted that the responsibilities of investors only extend so far: the responsible investment community in general, and PRI in particular, will need to find ways to work with other parts of the financial sector to ensure the stability of the system as a whole.