PRI seeking money managers to reveal lobbyist engagements

UN sustainability group will ask signatories what policymakers they financially support to probe ESG statements.

The world’s largest sustainable-investing group will require its thousands of money managers to disclose whether and how they engage with government officials and other policymakers to see if such lobbying efforts are in line with environmental and societal goals.

Starting next year, the United Nations-backed Principles for Responsible Investment said it will ask signatories if they financially support, directly or indirectly, policymakers as part of efforts related to environment, social and governance policies, the London-based group said this week in an emailed statement.

Connections with governments, memberships in trade associations and support for lobby groups and think-tanks are coming under increased scrutiny as investors weigh whether companies are living up to their stated ESG goals—like reducing harmful impacts on the planet and promoting racial and gender equity.

The PRI guides asset managers in incorporating sustainability in their investing decisions. Signatories, which include Wall Street giants like BlackRock Inc. and private equity firm Apollo Global Management, manage more than $100 trillion combined, the PRI said.

The PRI will also require asset managers to disclose, if they haven’t already, whether they’ve enacted internal policies to make sure that their activities involving policymakers are aligned with their stated positions on sustainable finance as well as the PRI’s six principles

The group had been considering whether to require its signatories to disclose information about their executives’ outside roles and donations to groups that seek to sway government policy, a person with knowledge of the PRI’s work said earlier this year. But the PRI decided against taking that extra step at this time, according to the statement.

Scrutinizing tens of thousands of executives would require more resources and would be an unwieldy task, according to another person familiar with the matter. The person requested anonymity when discussing internal talks.

The move by PRI comes after Bloomberg News reported that three money managers, Record Currency Management’s Neil Record, Harris Associates’s David Herro and Michael Hintze of CQS, had previously donated to or been involved with groups that question the science behind climate change or fight policies to curb its effects, while their firms—PRI signatories—simultaneously touted their ESG investments.

All three had connections with the Global Warming Policy Foundation, the main U.K. climate skeptic group. Hintze declined to comment on the PRI’s announcement, while Herro and Record didn’t immediately comment.

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Harris Associates, where Herro is deputy chairman and an investment chief, agreed earlier this year to enact several investor-driven measures. Brunel Pension Partnership, one of Britain’s largest retirement pools and a Harris investor, asked the $86 billion firm to enact measures including hiring a “responsible investment professional” who reports directly to senior management, create a climate change policy and appoint a shareholder advisory firm to identify climate risks.

Herro has said his personal donations “have nothing to do with my professional career or my employer” and that “one must listen to all sides of any argument.” Hintze has said “the role and duty of a senior investment officer and portfolio manager is to understand and analyze all sides of any debate.” Record Currency Management has said its founder is “passionate about the environment and supports informed debate across a range of policy areas.” 

One of Record Currency’s clients, the London Pensions Fund Authority, said in August it would “investigate” Record’s outside activities. The pension plan said it typically focuses on an asset manager’s investment strategy and performance, rather than the outside activities of individual executives.