The Principles for Responsible Investment (PRI) is a set of environmental, social, and governance (ESG) investment principles that were developed to promote sustainable and responsible investment practices. The PRI initiative was launched in April 2006 by a group of institutional investors in collaboration with the United Nations. By the end of 2023, more than 5300 companies in more than 80 countries had signed the PRI. Asset owners in the PRI hold more than $65 trillion in assets.1
Signatories have a duty to act in the best long-term interests of their beneficiaries, and they understand that ESG issues can affect the performance of investment portfolios. Signatories commit to the following:
Principle 1: They will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2: They will be active owners and incorporate ESG issues into their ownership policies and practices.
Principle 3: They will seek appropriate disclosure on ESG issues by the entities in which they invest.
Principle 4: They will promote acceptance and implementation of the Principles within the investment industry.
Principle 5: They will work together to enhance their effectiveness in implementing the Principles.
Principle 6: They will each report on their activities and progress towards implementing the Principles.
The PRI offers three different types of signatory: asset owners (organizations that represent end-asset owners who hold long-term retirement savings, insurance, and other assets), investment managers (companies that serve an institutional and/or retail market and manage assets as a third-party provider); and service provider (organizations that offer products or services to asset owners and/or investment managers).2
The PRI is lauded for its fundamental role in improving investment decisions for the clients and ultimate beneficiaries of asset owners and asset managers.3 However, the PRI is criticized for its voluntary basis that lacks strong enforcement mechanisms which can lead to “greenwashing”. In 2022, the U.S. Securities and Exchange Commission fined Goldman Sachs Asset Management, a PRI signatory, for failing to follow its policies and procedures involving ESG investments.4
Critics question the PRI’s emphasis on disclosure and reporting of ESG practices rather than measuring the actual impact of investments on sustainability and responsible business practices. The latter issue is important: do asset manager signatories follow through by changing their portfolio holdings to incorporate ESG? There is evidence that becoming a signatory to the PRI does not lead to an increase in a fund’s ESG score.5
1 Principles for Responsible Investment, “2022-2023 Annual Report,” Link
2 OECD, “The UN Principles for Responsible Investment and the OECD Guidelines for Multinational Enterprises: Complementarities and Distinctive Contributions,” 2007, https://www.oecd.org/investment/mne/38783873.pdf
3 Eccles, Robert G., “Do Signatories to The Principles for Responsible Investment Practice What They Preach?” Forbes, Aug 4, 2020, Link
4 U.S. Securities and Exchange Commission, “SEC Charges Goldman Sachs Asset Management for Failing to Follow its Policies and Procedures Involving ESG Investments,” Nov. 22, 2022, Link
5 Mozaffar Khan, George Serafeim, Aaron Yoon; Corporate Sustainability: First Evidence on Materiality. The Accounting Review 1 November 2016; 91 (6): 1697–1724. https://doi.org/10.2308/accr-51383