Overcoming UNPRI implementation hurdles

With some government-committed funding, the Responsible Investment Academy, has the flexibility to achieve its aim of being the first global academic-training centre to teach pension funds and their service providers how to formally incorporate environmental, social and governance (ESG) issues in their investment assessments. Amanda White spoke to chair of the academy’s advisory council, Steve Gibbs.

About 180 global institutional investors, and more than 300 hundred of their service providers, agree with the United Nations Principles of Responsible Investment (UNPRI) enough to sign up to them. And yet, still most internal fund investment staff and funds management  analysts struggle with how to practically implement these principles into their analysis of investments.

Principles 1 and 4 go some way to instructing how to do this, with guidance such as “ask investment service providers to integrate ESG factors into evolving research and analysis” or “revisit relationships with service providers that fail to meet ESG expectations”.

But this doesn’t give much instruction on how to actually implement ESG considerations into stock picking analysis, quantitative modelling or risk management from an analysts perspective, be they an external provider or internal funds manager.

This is the logic behind the idea by Louise O’Hallaran, executive director of the Responsible Investment Association Australasia (RIAA), to set up a Responsible Investment Academy.

Using some face-to-face technology, and embracing web technology, the Academy will offer a series of progressive, multi-media training courses, starting with professional development seminars that will be rolled out before the end of this year, spurred by the assistance of the Australian Government’s A$2.5 million ($2 million) financial commitment over three years.

With a global reach, the Academy will be managed by the RIAA and governed by an Australian and international advisory council, chaired by Steve Gibbs, who was also a representative on the UNPRI steering committee and global investor group that set up the principles.

According to Gibbs, while there has been great interest in the principles, there is a significant gap in how to implement them.

The aim is a formal academic-level training program available for investment professionals to develop skills in this area, will help in the implementation and development of the principles.

Indeed the PRI says: “for institutional investors to make these Principles work, they will need to encourage a change in the way that their agents incorporate ESG issues into their processes”.

According to Gibbs the Academy will provide responsible investment research, policy and innovation and in particular provide investment professionals with a structured education and training program on key responsible investment risks, opportunities and concepts.

Funds manager analysts and brokers will be the main focus of the program, but it will extend to business development managers, as well as pension fund staff and trustees.

“I think even if internal fund staff and trustees knew the questions to ask, they wouldn’t know if they were getting the right answer,” Gibbs says.

Since the Australian Government’s commitment to the academy, Gibbs and his advisory council, made up of industry and investor representatives, have been developing the curriculum and deciding on the best delivery mechanisms.

While the academy has decided on an online delivery provider, the decision whether to partner with a tertiary education facility has not yet been made.

“On one hand it would be better not to, as we are looking at developing very practical courses,” he says.

It is expected that professional development seminars will be held before the end of the year, but Gibbs says it is a two-year project to fully develop the course.

Gordon Noble, principal at Responsible Investment Consulting, is the project officer.