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July 21, 2017: The PRI is recruiting for two new working groups looking at the SDGs: asset allocation and active ownership

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The PRI is currently recruiting members for two new working group focused on the Sustainable Development Goals. The first one looks at how the relevance of the SGDs to asset allocation and the second one is focused on the inclusion of the SDGs in active ownership activities in listed equity and corporate fixed income.

Interested signatories are invited to get in contact by 11 September.

Background

In September 2015, the global community committed to adopt a set of goals - the SDGs - to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda. Each goal has specific targets to be achieved over the next 15 years.

The UN Commission on Trade and Development (UNCTAD) has estimated that meeting these targets will require US$5-7trn in investment each year from 2015-2030. But the UN and member countries cannot deliver on the SDGs alone; only an estimated US$1trn annually will come from public funds, leaving a gap of US$6trn annually for private capital to fill.

In response to this new global challenge, the PRI has made the SDG agenda an intrinsic part of the next 10-year Blueprint for Responsible Investment. To help align signatory investment decisions and the PRI's work with the SDGs, an Advisory Committee has also been formed (see members and terms of reference here ).

The PRI is currently finalising a publication with PwC to present the SDG Investment Case for investors which will be officially presented at the PRI in Person annual event in September 2017. The document will clarify why the Sustainable Development Goals (SDGs) are relevant to (responsible) investors. Once the importance of the SDGs for investment strategies and decisions has been presented, the next activities will focus on how to incorporate the SDGs in investment practices.

Working group 1: asset allocation

Once investors have agreed on the relevance of the SDGs for their investment strategy, the next question is how to incorporate the SDGs into their investment decisions. For asset owners, that issue starts with the question of if and how the SDGs (and maybe ESG issues in general) are relevant to asset allocation.

The PRI has published numerous guidance documents on investment strategy, policy and the incorporation of ESG factors across diverse asset classes, but before now we haven't paid much attention to the process of asset allocation. We are also aware of the fact that hitherto there has been limited experience as regards incorporating ESG factors in asset allocation. The main question that this working group will deal with is if and how the SDGs can, and maybe should, affect decisions on asset allocation.

The working group will present its findings to both the SDG advisory committee and the asset owner advisory committee. Decisions will be made in accordance with procedures reflected in the terms of reference.

Working group 2: active ownership

More traditional approaches to active ownership (engagement and proxy voting) have focused primarily on companies' procedures and processes to adequately manage ESG risks. Adopting the SDGs as a relevant framework for responsible investment raises the question of whether and how active ownership practices will evolve. As the SDGs are not just about preventing and mitigating ESG risks, but also creating positive outcomes for society, active ownership activities could expand their focus on new business opportunities in response to sustainability challenges. This would also inevitably entail the use of different tools and measures of success.

The working group on "SDGs and active ownership" will look at this potential evolution from a listed equity and corporate fixed income perspective.

The final output of the group will be a publication tackling the following questions:

- Is SDG investor engagement different from ESG investor engagement? - How can SDGs be incorporated in active ownership practices? - What tools are currently available for investors? - How could success be measured?

How to get involved

Each working group will comprise approximately 15-20 members and will be supported by two PRI staff members. Typical commitments include participation in regular group calls, contributions with case studies and sharing of comments and feedback to drafts.

Asset owners, investment managers and service providers interested in being involved, are invited to contact Jake Goodman (jake.goodman@unpri.org) by 11 September. The email should include:

a brief biography; a paragraph summarising the potential contribution to the group and the motivation to be a member; approval of the working group's terms of reference: click here for asset allocation and here for active ownership.

INDEX

SECTION 1 UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT PROFILE

SECTION 2 PRESS RELEASES: 2017

SECTION 3 OTHER NEWS: 2017

SECTION 1 UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT PROFILE

1.1 ACTIVITIES

United Nations Principles for Responsible Investment is a network of investors who work towards the implementation and practice of the principles for responsible investment. The principles provide a voluntary framework for the investment community, by which they can incorporate environmental, social and corporate governance into their decision-making. United Nations Principles for Responsible Investment was founded in 2005 and is based in New York, New York.

1.2 SUMMARY

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Website: http://www.unpri.org

Industry: Miscellaneous Commercial Services and Supplies

SECTION 2 PRESS RELEASES: 2017

July 13: United Nations Principles For Responsible Investment: PRI responds to the Sustainable Finance High Level Expert Group interim report

A high-profile advisory body to the EU - the Sustainable Finance High-Level Expert Group (HLEG) - has called for 'urgent and transformational' action to accelerate the transition to a low carbon, sustainable economy.

The HLEG, in which the PRI participates as an international observer, was established in December 2016 and is tasked with advising the European Commission on a strategy to fully integrate sustainability into Europe's system of financial regulation. The group comprises 20 experts from the finance sector, civil society and academia.

Source: Company Website

July 13: United Nations Principles For Responsible Investment: PRI launches private equity fund terms guide

The PRI has today launched guidance on the incorporation of ESG provisions in private equity fund terms, the result of a year-long consultation with PRI signatories, expert counsel and industry associations.

The guidance identifies current and emerging best practice, as well as potential constraints, and offers practicable options to LPs and GPs that are considering how they might incorporate responsible investment into fund terms.

The main aims of the guidance are to demystify what ESG provisions are, clearly outline what they are trying to achieve, and work towards industry consistency and harmonisation on this aspect of responsible investment.

Fiona Reynolds, Managing Director of the PRI, said: "We have experienced an enormous amount of goodwill from both LP and GP signatories, who use the PRI as a platform to work towards an alignment of expectations and to understand best practice as it evolves. The influence this is having on the private equity industry is transformative."

Marta Jankovic, Senior Responsible Investment and Governance Specialist, Head of ESG Integration Alternatives at APG Asset Management, Chair of Invest Europe, and Co-Chair of the PRI signatory working group, said: "The PRI guidance aims to highlight the evolving practice in the market on the topic of responsible investment provisions, explaining what drives LPs to have certain requirements and how these are implemented in practice."

Alison Hampton of HgCapital, Co-Chair of the PRI signatory working group, added: "In providing this guidance, we see potential benefit to both LPs and GPs so that over time their approach to formally articulating ESG commitments can become more harmonised."

With this guidance, entitled Incorporating responsible investment requirements into private equity fund terms, the PRI private equity programme delivers the second in a trilogy of tools designed to support LPs and GPs throughout manager selection, appointment and monitoring.

In November 2015, the PRI published the LP Responsible Investment Due Diligence Questionnaire as the first tool.

The third and final step will be to deliver guidance on monitoring and reporting on ESG factors during the lifetime of the fund.

July 11: PRI launches Germany roadmap

The PRI, UNEP FI and The Generation Foundation have published their eighth roadmap - The Germany roadmap - which builds on the report Fiduciary duty in the 21st century.

Many industry experts involved in this study indicated that ESG integration in Germany is on average less advanced than neighbouring France, the Netherlands, the UK and Scandinavia. Despite this, recently momentum is growing with sustainable finance initiatives in Frankfurt and Berlin.

The Federal Government has taken several actions to address levels of ESG integration, including commissioning analysis on financial stability risks relating to climate change.

To encourage full integration of ESG issues across German capital markets, the roadmap has made recommendations based on four priority themes: government leadership; legal clarity and consistency on ESG integration for institutional investors; guidance for fund managers; and high quality disclosure of ESG factors by investors as part of the implementation of the CSR directive.

The recommendations in the roadmap draw on 25 interviews with key German stakeholders. The roadmap also identifies policy examples from other mature financial markets, such as the US, UK and Canada, and importantly, at the European-level which have been the subject of other country roadmaps of our fiduciary duty project.

"The German roadmap is the last of eight in-depth studies produced by the PRI, UNEP FI and The Generation Foundation as part of the Fiduciary Duty in the 21st Century Project, said Nathan Fabian, PRI.

"Each examines a key economy and provides policy and investment practice actions to embed ESG in fiduciary duties.

"The sustainable finance agenda is gaining momentum in Germany, most recently with the launch of the Frankfurt Declaration.

"We are grateful for the input of our signatories and partners from across government and industry and look forward to working together to put these recommendations into action."

"A widely understood fiduciary duty is a key factor for the development of a sustainable financial system.

June 29: United Nations Principles For Responsible Investment: PRI perspective: investors must drive implementation of the FSB Task Force final report

The FSB Task Force on Climate-related Financial Disclosures (TCFD) marks a turning point on how companies, banks, insurers, investors and regulators understand and respond to climate risk and opportunity. Its recently-released final report marks a vital step forwards on climate change - crucially providing investors and companies with a common financial language for it.

Over 360 investors with US$19 trillion are asking the G20 to support the task force's recommendations, including: Aegon NV, Alliaz Global Investors, AP4 (Fourth Swedish National Pension Fund), Australian Council of Superannuation Investors, Mirova, MN, New York State Comptroller, OPTrust and Zurich Insurance Group.

In addition, more than 100 firms have provided statements of support to encourage take-up of the recommendations.

For PRI signatories, the TCFD brings a sharp focus to the financial impacts of climate-related risks and opportunities, providing:

Source: Company Website

June 05: United Nations Principles For Responsible Investment: PRI launches South Africa roadmap

Today, the PRI, UNEP FI and The Generation Foundation published a new report - The South Africa Roadmap - which builds on the report Fiduciary duty in the 21st century.

ESG issues are critical to the South African economy and society, with ESG-related corporate failures prompting the country's leaders to take action, including more investment in sustainable energy as part of the government's National Development Plan. The National Treasury has also convened a Sustainable Finance Working Group to ensure that sustainability themes are reflected in national legislation and regulation.

The roadmap makes recommendations to ensure South African institutional investors understand that their fiduciary duties require them to consider material ESG issues in their investment processes and decision making. This builds on South Africa's long-history of pro-ESG initiatives, most notably in the form of Regulation 28, the Code for Responsible Investing in SA, and the pioneering work of the Johannesburg Stock Exchange in its support of integrated reporting by listed companies.

"This roadmap will inform the PRI's work plan for South Africa in the next few years," said Adrian Bertrand, head: Africa & Middle East, PRI.

"We are most grateful to our many valued signatories and stakeholders consulted in the development of this roadmap.

"The PRI is committed to partnering with our signatories and stakeholders to implement the recommendations of this roadmap and welcome further inputs as to how best we can collaborate as an industry to achieve this in South Africa."

The roadmap seeks to ensure that the effect of these initiatives is reflected in the day-to-day investment practice of South African pension schemes and asset managers. This requires interventions in four categories: regulatory guidance (building on Regulation 28 and PF-130); enhanced stewardship (enabling CRISA's role); investor education (ensuring ESG is embedded into trustee core competencies); and corporate reporting (ensuring that material ESG factors are reported by South African corporations).

In addition, the roadmap contains a new trustee training initiative.

May 24: United Nations Principles For Responsible Investment: PRI releases briefing document on US regulation and climate change

In a move to bring clarity to proposed changes in the US around policy and regulation issues, the PRI has released a briefing document for both US and global signatories.

Since President Trump took office in January this year and began to assemble his administration, the political tide has turned in favour of looser securities regulation, a weaker commitment to climate change and environmental legislation and a more protectionist trade policy.

This is borne out by the number of new proposals have crossed desks at the SEC, Department of Labor, and the U.S. Treasury, which have the potential to impact financial and environmental legislation, including the ability of shareholders to bring proposals to annual general meetings and a loosening of climate change policies.

Responding to these concerns, the PRI has prepared this regulation update, outlining and summarizing for investors some of these proposed changes and their potential impact. Many U.S. asset managers and owners have embraced, embedded and endorsed ESG incorporation across the marketplace as a critical pillar in the achievement of long-term value creation. And the message that companies are rewarded for ESG-focused business practices through higher returns by investors as well as stronger brand loyalty by consumers, work ethic by employees, relationships with vendors, and support from local communities is increasingly being heard across the U.S. and other countries.

While the PRI does not expect federal policymaking to have significant negative implications on the level of interest and business case for responsible investment-thanks to growing

investor support around ESG issues and the strength of policies at the state level-we are concerned about any winding back of shareholder rights in the U.S., and the message that withdrawing from the Paris Agreement would send to other countries.

"Given the uncertainty around new regulatory and policy proposals in the US, it is vital that investors keep engaging policymakers on these issues," said PRI managing director Fiona Reynolds.

May 17: United Nations Principles For Responsible Investment: PRI and ERM launch project to develop private equity reporting guidance

The PRI has launched a project to develop guidance for Limited Partners (LPs) and General Partners (GPs) on how to report on and monitor the ESG integration practices of GPs during the lifetime of a fund.

The PRI is pleased to announce that ERM has been appointed as the consultant on this project and will be responsible for conducting the research and co-authoring the guidance with the PRI. They will be supported by a global working group of over 40 PRI signatories.

The objectives of the project are:

present the value creation case to both LPs and GPs of reporting and monitoring ESG-related practices during the life of a fund;

give a range of flexible options relevant to LPs and GPs on how to report and monitor ESG practices and issues that apply to investors at different levels of ESG integration maturity;

encourage a more consistent approach from LPs and GPs on ESG-related monitoring and reporting which will lead to a more streamlined approach across the sector.

"ERM is proud to work with the PRI on this project to develop practical guidance for LPs and GPs in order to enhance the effectiveness of their monitoring and reporting of ESG-information during the life of a fund.

"From our experience working with private equity and other organisations, we know the value that can be achieved through taking a comprehensive approach to integrating ESG factors to deliver improved business performance," said Keryn James, CEO, ERM.

Fiona Reynolds, managing director, PRI said: "With the start of this project, we begin the final stage in the selection, appointment and monitoring series. When completed, the private equity industry will have a full suite of tools available from the PRI for incorporating ESG considerations into the LP-GP exchange and dialogue.

"The size and diversity represented in the working group is testament to the demand for these tools.

SECTION 3 OTHER NEWS: 2017

July 21: The PRI is recruiting for two new working groups looking at the SDGs: asset allocation and active ownership

The PRI is currently recruiting members for two new working group focused on the Sustainable Development Goals. The first one looks at how the relevance of the SGDs to asset allocation and the second one is focused on the inclusion of the SDGs in active ownership activities in listed equity and corporate fixed income.

Interested signatories are invited to get in contact by 11 September.

Background

In September 2015, the global community committed to adopt a set of goals - the SDGs - to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda. Each goal has specific targets to be achieved over the next 15 years.

The UN Commission on Trade and Development (UNCTAD) has estimated that meeting these targets will require US$5-7trn in investment each year from 2015-2030. But the UN and member countries cannot deliver on the SDGs alone; only an estimated US$1trn annually will come from public funds, leaving a gap of US$6trn annually for private capital to fill.

In response to this new global challenge, the PRI has made the SDG agenda an intrinsic part of the next 10-year Blueprint for Responsible Investment. To help align signatory investment decisions and the PRI's work with the SDGs, an Advisory Committee has also been formed (see members and terms of reference here ).

The PRI is currently finalising a publication with PwC to present the SDG Investment Case for investors which will be officially presented at the PRI in Person annual event in September 2017.

July 18: United Nations Principles For Responsible Investment: How Companies Can Lead Fight Against $150 Billion Human Trafficking Trade

Human trafficking, essentially modern slavery, is a large and growing practice, although most people are unaware of its existence and extent. Pope Francis has called it a plague on humanity. The NGO Human Rights First notes that Human trafficking is the world's fastest growing criminal enterprise, earning exploiters an estimated $150 billion annually. Elaborating on this, Amy Sobel, Vice President, Anti-Human Trafficking Campaign, says that modern slavery is occurring in the vast supply chains that fuel our global economy, causing human tragedy and damaging some of the world's most trusted brands. An article, Inside the Scarily Lucrative Business Model of Human Trafficking, in Time shows that it is a very profitable business. An estimated 21 million victims are entrapped by this practice and the number is growing at about 800,000 per year. Human Rights First has a campaign to Bankrupt Slavery: Dismantling the Business of Human Trafficking which is focused on increasing risks and decreasing profits for perpetrators.

This is a terrible problem, undoubtedly, but what does the seamy world of human trafficking have to do with the exalted world of company board rooms? The answer is that a company's board of directors is responsible for determining the material issues that the company should be reporting on.

July 05: PRI publishes new report on ESG factors in credit risk analysis

Building on the successful launch of the ESG in Credit Ratings Statement last year, the PRI has produced a report outlining how investors and credit rating agencies (CRAs) are paying heed to environmental, social and governance factors (ESG) in credit risk analysis.

With funding from the Rockefeller Foundation, Shifting perceptions: ESG, credit risk and ratings - part 1: the state of play looks at why ESG factors matter in credit risk analysis, what investors and CRAs are currently doing on this front, and what their expectations are.

The report highlights several disconnects between investors and CRAs, particularly regarding views on which time horizons to consider. It also raises questions related to the role of regulators, products that complement traditional credit rating tools, and how credit analysts can be incentivised to incorporate ESG factors more systematically in their analysis.

"The dial is definitely beginning to move in the right direction, but we are not at a stage yet where ESG factors are systematically included in credit risk analysis.

"ESG integration is still perceived as a 'nice-to-have' rather than a 'must-have'," said Carmen Nuzzo, PRI Senior Consultant, Credit Ratings Initiative.

Highlights from the report include:

Investors and CRAs are ramping up efforts to consider ESG factors in credit risk analysis.

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