The UN-backed Principles for Responsible Investment (PRI) has set out proposals for a new ‘aspirational’ stewardship standard.
According to the industry body, while stewardship is the most powerful tool investors have to align the economy and society with the interests of beneficiaries, many asset owners are not using it to its fullest potential.
The PRI said its new stewardship programme, Active Ownership 2.0, is designed to solve this problem and will set clear expectations for how stewardship can be used to deliver real change for the global economy, environment and society.
Active Ownership 2.0, which is being pitched as a ‘proposed aspirational standard for improved stewardship’ builds on existing practice but explicitly prioritises three key areas. These include outcomes over process and activity, common goals, and effort over narrow interests.
While the PRI warned the implementation of Active Ownership 2.0 will represent a greater challenge for signatories whose responsible investment commitments are still developing, it said the programme will provide signatories with greater clarity about the goals they should be aiming to reach.
“The ills of society continue because many institutional investors have been reluctant to use the influence they have,” Paul Chandler, director of stewardship at the PRI, said. Where they have used this influence, they’ve taken tentative steps, focusing on the short-term and on individual holdings in their portfolio rather than the bigger picture.
“Our first paper [on the new framework] sets out the case for change, explaining how investor myopia limits the potential of stewardship. It proposes an aspirational higher standard for evolved active ownership in which investors work to deliver real-world outcomes on critical systemic issues using strengthened collaboration to get us there,” Chandler added.
The PRI said it will invite signatory input on the stewardship framework and will provide further guidance on its practical implementation over the coming months.