Outline
The Principles for Responsible Investment (PRI) provide an international, aspirational framework for investors fulfilling their fiduciary duty (or equivalent) on the integration of extra-financial factors into investment decision making. The principles were developed by an international group of institutional investors, including USS, convened by the United Nations Secretary-General.
The original announcement of the project took place in London in 2004 with the then Chairman of USS speaking at the event. USS participated in the development of the Principles and was a founder signatory at the official launch at the New York Stock Exchange in April 2006.
USS continues to be a strong supporter of the PRI and plays an active role in the governance of the initiative and through participation in the initiatives’ activities. A USS Director (Trustee) USS sits on the Board of the initiative and a Co-Head of the RI team sits on the PRI’s Management Oversight Committee (MOC).
Tracking progress against the Principles
There are 6 principles for responsible investment covering the integration of environmental, social and governanace (ESG) issues into investment analysis and decision-making processes, active ownership, encouraging the disclosure of ESG issues by investee entities, the promotion and acceptance of the principles within the investment industry and reporting on activities and progress relating to the principles.
The comply or explain approach to the PRI requires signatories to report annually on how they implement the Principles, or provide an explanation where they do not comply with them.
In addition to completion of the annual self-assessment, USS has also participated in the audit process undertaken by the PRI Secretariat and provides feedback to the UN PRI secretariat to help in further developing the application of the principles.
USS Annual PRI Questionnaire Response & Assessment Results
As part of the funds’ commitment to transparency, both USS submissions and PRI’s assessment results are disclosed below.
PRI Assessment Results 20101, 2, 3
PRI USS Responses 2010
PRI Assessment Results 20091
PRI Summary of USS responses 2009
PRI Assessment Results 20081
PRI Summary of USS responses 2008
PRI Assessment Results 2007 1, 2
Notes on USS scorecards
1. Scores have been calculated based on signatories’ self assessment and using the scoring methodology approved by the PRI Assessment Group. Not all responses have been independently verified by the PRI Secretariat, PRI Assessment Group, or any other third party. Individual results including comparisons to the overall results (quartiles) are indicative and do not imply an endorsement of signatory activity. While this information is believed to be reliable, no representations or warranties are made as to the accuracy of information presented, and no responsibility or liability can be accepted for any error, omission or inaccuracy in this information.
2. USS was pleased to be ranked first and second quartile against its peers in most areas. USS was disappointed to have been ranked in the third quartile for its implementation of Principle 2 (Engagement). However, this is because the fund refuses to complete the questions which ask respondents to count the number of meetings they have had with companies during the year, as we do not consider this a measure of the quality of engagement. Our rationale is explained more fully in the response documents provided above.
3. USS scored 4th quartile for Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest. We believe that; the ranking for this question reflects the strategy of USS, particularly for public equities: there are many other investors who focus on this aspect of responsible investment, whereas USS believes that its resources are better spent focusing on other aspects of RI, such as integration and engagement in more strategic areas. USS does ask companies to disclose extra financial information both as part of collaborative engagement initiatives (such as the Carbon Disclosure Project, Institutional Investors Group on Climate Change and others), through voting in favour of shareholder resolutions, and in individual meetings with companies. Whilst recognising that freestanding reports covering corporate responsibility issues are requested by many stakeholders, USS has focussed in recent times on encouraging companies to disclose material extra financial information in Annual Reports and Accounts. This is because investors are more likely to take note of such information if it is located in this formal document than in other reports, and are therefore more likely to integrate it (Principle 1) into their investment decisions. Amongst other things, USS is also actively encouraging improved disclosure by the fund’s private equity managers, an asset class where such disclosure is rare.
USS Enhanced Response to the PRI Questionnaire
The fund has also prepared an ‘Enhanced Response to the PRI questionnaire’ in order to expand on the issues raised and demonstrate more fully how we comply with the six principles. The report covers many aspects of USS’ approach to RI including sections on screening, integration, engagement, voting, market-wide activities, use of RI service providers, reporting and disclosure.
USS Enhanced Response to 2007 PRI Questionnaire
USS Activities with PRI
Some examples of the activities undertaken through PRI are included below. For more up to date information, please see the latest USS RI activity reports.
Private Equity
USS played an active role in extending RI principles to the private equity sector, working through the UN PRI with LPs, GPs and sector representative bodies. USS played a significant role in the 2009 publication of the PRI’s “Responsible Investment in Private Equity: A Guide for Limited Partners".
USS’ internal private equity managers and RI staff participated in work between the PRI and the US Private Equity Council (the US body representing some of the largest private equity firms) which contributed to the developed their own RI Guidelines. Additionally, the BVCA (the UK’s industry body for private equity and venture capital) has established an RI Advisory Committee which includes a USS representative and the Australian Venture Capital Association (AVCAL) is recommending all its member join PRI.
PRI and the UN Global Compact
In 2008 the Fund participated in a PRI initiative, led by Morley, to write to 103 company participants of the UN’s Global Compact - tool for helping companies commit to sustainability and corporate citizenship. In a letter to CEOs, the investors – representing approximately US$2.13 trillion in assets – reminded companies of the Global Compact’s commitment to disclosure and noted particularly good practices.
In October 2008, a group of 52 PRI signatories came together under the banner of ‘The Seoul Initiative’ to call upon almost 9,000 listed companies in the MSCI World, FTSE All-World and IFC Emerging Markets Indices to participate in the UN Global Compact. The UN Global Compact requires a commitment to implement ten principles in the areas of human rights, labour standards, the environment, and anti-corruption – and to communicate annually on progress made.
USS posting to PRI Clearing House: Invitation to join Investor Statement on Climate Change, 2008
USS, with Insight Investment, posted an invitation to the PRI clearing house encouraging members to support the IIGCC’s Investor Statement on Climate Change. The Statement calls for action on the threat posed by greenhouse gas emissions and provides a roadmap for investor activity in the climate change debate. Signatories to the Statement commit to participating in an annual survey on their actions related to climate change – which USS participated in earlier this year – see under IIGCC.
USS posting to PRI Clearing House: Invitation to sign up to CDP 2008, December 2007
USS drew PRI signatories’ attention to the launch of Carbon Disclosure Project 2008 (CDP6).
PRI joins forces with Enhanced Analytics Initiative to create PRI Enhanced Research Portal
In October 2008 PRI and EAI joined forces under the PRI banner with the aim of broadening and internationalising the call for better research on the integration of ESG into investment decision-making. The project will encourage research buyers to work collaboratively to communicate research expectations and signal the type of analysis that is most useful.
Guiding this new project are several insights concluded by EAI in its final report, "Research centre stage: Four years of the Enhanced Analytics Initiative." For more details on the Enhanced Analytics Initiative, see the RI Archive.