Responsible investment group may toss firms for lack of effort

[July 08, 2016]  By Ross Kerber

BOSTON (Reuters) - A United Nations-supported group that works to advance principles of responsible investing will create a process to remove members after complaints that some large asset managers do little to press for reforms in areas such as climate change, its top official said.

Fiona Reynolds, managing director of Principles for Responsible Investment, said she expects the London-based organization to adopt rules by early next year that allow the delisting of companies that fail to put its principles into practice.

"We are committed to increasing accountability, and I can't see how you can increase accountability without delisting the worst offenders," Reynolds said in a recent interview. She declined to name any signatories but said some large asset managers were among those causing concern as the organization reviews its rules upon its 10th anniversary.

"If they sign on but don't have any intent, that ruins the brand for everyone," she said.

Asset managers Franklin Resources Inc and T. Rowe Price Group are among the signatories that have faced criticism over their environmental practices. Representatives for each declined to comment.

Losing the PRI designation would be a problem for an asset manager, said Alex Bernhardt, U.S. responsible investment leader at consulting firm Mercer.

In practice, however, just the threat of removal could spur a manager to make changes, Bernhardt added.

The new rules would be part of a broader review of practices by the PRI, which claims 1,500 signatories managing $62 trillion. Signatories pledge to consider environment, governance and other factors into their decision-making, and to seek disclosures in those areas from companies in which they invest.

Critics worry some companies sign up but do little else.

They see the organization only as "a marketing thing," said Sonia Kowal, president of Zevin Asset Management of Boston. Last year Zevin unsuccessfully backed shareholder resolutions that called for Franklin and T. Rowe Price to report on how their proxy voting squared with their policy positions on climate change.

Franklin did not back any shareholder resolutions calling on companies to report on the impact of climate change on their operations during the 2015 proxy season, according to researcher Proxy Insight. T. Rowe Price backed them 14 percent of the time.

In response to the proposals, both companies said they consider environmental factors in voting and also have fiduciary obligations to their clients.

(Reporting by Ross Kerber; Editing by Lisa Von Ahn and Steve Orlofsky)

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