The Principles for Responsible Investment (PRI) will reduce signatories’ responsibilities in their annual mandatory reporting, as the UN-backed body looks to stay relevant amid a surge of new responsible investment codes and standards.
The reporting framework will be slashed to consist of just 40 questions, down from the current 240 and will come into force next year.
Outgoing PRI chief executive David Atkin says the change recognises that investors bear too much administrative burden around ESG disclosures but promises that the simplified assessment will be just as rigorous.
“The overhead [in our reporting] was disproportionate to the value of the effort,” he tells Top1000funds.com in an interview before he officially stepped down on December 1. Atkin will remain at the PRI as an advisor until April 2026.
“The reporting system has been very important, and it’s been such a critical element of the growth of responsible investment around the world, but at a time when there are now so many other mandatory requirements and voluntary codes, our signatories were drowning under the amount of work they had to do.”
Atkin said the new assessment will remove more “granular” questions such as those on the asset class and strategy levels, and will instead focus on organisational level commitments such as how ESG is incorporated into governance and investment analysis.
A new concept that was introduced into the new reporting framework is the so-called three-pronged “PRI pathways”, which essentially allow signatories to choose an ESG approach to align with. They can choose to incorporate ESG factors in their investment approach, address sustainability-related financial risks, or pursue positive impacts.
Atkin does not see this approach as putting the reporting system at risk of being gamed. Instead, it could offer better insights for asset owners who may want to see if a manager has an aligned responsible investment approach.
“I think that’s much more useful information than trying to get all of that through the [old] assessment, which is one size fits all and just frustrates everybody,” he says.
There have been some volatile sentiments around responsible investments, particularly in the US due to the Trump administration’s hostile stance against ESG principles.
This September, the US Employee Benefits Security Administration, which oversees $14 trillion of the nation’s private retirement assets, labelled the OECD’s responsible investment principles for pension funds “nothing but a Marxist march through corporate culture” and said it will no longer support such policies. [See US Department of Labor slams OECD on ‘Marxist’ ESG policies].
Asset managers which were public supporters of responsible investment also had to work hard to win back or retain mandates from US public funds, such as the $11.5 trillion BlackRock which was removed from Texas politicians’ blacklist only after it dropped out of Climate Action 100+ and the Net Zero Asset Managers alliances. [See Texas politicians reinstate BlackRock as manager’s ties to the state grow].
The role of asset owners
Atkin says asset owners can play a bigger role in stabilising the discussion around responsible investments.
“If asset owners are consistent in signalling to the marketplace that responsible investment remains relevant and that they will reward those managers who are aligned with mandates and incentivised around working on those [responsible investment] areas, the political stuff will just take care of itself,” he says.
Atkin has seen discussions around ESG flip during his time at the PRI. When he joined PRI in 2021, investors were living through peak “ESG”. Stronger recognition around climate change and social unity, alongside a positive geopolitical environment, contributed to the tailwinds around responsible investment post-COVID.
But soon after, the Russian invasion of Ukraine and the inflation-fuelled cost of living crisis have given a voice to populist politicians, which included climate denialists.
Despite the pushbacks, Atkin says the green energy transition will not change direction as its logics are rooted in economics, not politics.
“It is unstoppable,” he says. “In a world where we now need to create more energy capacity to deal with AI and data centres… when you look at the comparison between the cost of building renewables compared to fossil fuels, it’s very clear that renewables are the more economical solution. That’s got nothing to do with politics.”
“If you believe the science, and you are suddenly stopping work [on responsible investment] because the politics have got difficult for you, then you are not performing your fiduciary responsibility.
“In fact, I think you’re exposing yourself to litigation risk.”
In December, Atkin returned to his home country of Australia and will support interim chief executive Cambria Allen Ratzlaff in an advisory capacity until April 2026. PRI lifted the number of signatories from 3,000 to more than 5,000 during his time as the chief executive.
Before that, Atkin spent 15 years on PRI’s board between 2009 and 2015, which is why he anticipates ongoing contributions from Asia Pacific to the organisation even though he has left the executive post.
“As an industry, if you’d said five years ago that we would have more than 50 per cent of the world GDP covered by sustainability standards, I would have said you were dreaming,” he says.
“But that’s where we are right now, 60 per cent of the world are in the process of adopting ISSB standards.”
Most importantly, emerging markets are upping their game in creating sustainable investment opportunities with “pragmatic” policymaking and “institution-oriented” governments, which is crucial as they account for a significant portion of the global population.
“You could say one sign of success is that we’re not needed. But I think there’s going to be an ongoing need for an organisation like the PRI because you’ve got people continuing to go on their learning,” Atkin says.
“I’m really proud of the fact that we’ve been able to navigate this complex environment, introduce new and better value to our signatories, and reinvigorate our relationship with our asset owner community.
“There has been a lot of time invested, but I’m really excited about the future.”
