As part of the Path to COP28 campaign, GEFI, in partnership with PwC, organised a Principles for Responsible Investment (PRI) private roundtable which brought together banks, asset managers, sovereign wealth funds, and regulatory representatives to discuss and share global best practice.
The roundtable represented participants’ commitment to collaboration and sharing knowledge, a core element of accelerating sustainable action. The discussion focused on the barriers preventing local asset managers in the Middle East from engaging with PRI, as well as the opportunities and support that the PRI can provide to investors. Current PRI signatories also discussed their experience and the lessons learned through their journey.
Overview of PRI and Global ESG Trends
Insights of the PRI principles, its 10-year blueprint vision, and global ESG trends were presented. With half of the world’s institutional capital currently signed up to PRI, signatories’ experience with ESG varies, which is why PRI’s guidance is intentionally co-created with their signatories. The PRI has a growing presence in emerging and frontier markets, with a few signatories in the Middle East, who are expected to publish their reports this month.
Active Ownership and PRI Reporting Framework
Another participant, scoring highly on PRI reporting, emphasized that ESG sustainability is an integral part of investment. They highlighted the significance of active ownership through stewardship and engagement, placing responsibility on investors themselves. The reporting framework was recognized as a valuable tool for learning and improvement in strategy, integration, and ownership. Participants acknowledged the resource-intensive nature of reporting but also noted the evolving focus on sustainability outcomes and the increasing importance of TCFD-aligned climate questions.
Barriers to Engagement and Regional Perspectives
Various barriers to engaging with PRI were discussed, including attracting undue criticism of sustainability policies under development, governance management, and the transition from ESG integration to ESG outcomes impact. Participants emphasised the need for appropriate value provision and regional support to contextualise progress. In contrast to financial institutions based in Europe and the US, which joined the PRI as part of the process of developing their responsible investment policies, those in the Middle East – particularly asset owners – saw well-developed responsible investment policies, accountability, and leadership as a prerequisite for signing up. Participants noted that the level of engagement did not yet reflect the desired impact. The implications of early-stage sign-ups without sufficient demand from asset owners and institutional investors for ESG mandates were also explored.
Leveraging Standards and Accelerating Conversations
The evolution of PRI and its potential mismatch with asset owners’ readiness and capabilities were identified as potential barriers. Participants discussed the significance of standards, such as the ISSB, in expanding PRI’s efforts and addressing the challenge of accessing reliable data. They highlighted the importance of leveraging the collective expertise and challenges faced by the numerous signatories to establish common consensus. Additionally, the role of sovereign wealth funds in accelerating responsible investment conversations was emphasized, and the MENA region was seen as having an opportunity to leapfrog the EU through increased collaboration and incentives.
Shariah Compliance and ESG Integration
Shariah-compliant signatories discussed the integration of responsible investment and shariah-compliant investments. Negative screening, transparency, and ethical investing were determined as common denominators, and shariah financial due diligence has helped analyse ESG advantages and reduce risks. The discussion emphasized that ethical investing is not exclusive to any particular group and highlighted the benefits of financial due diligence and ESG analysis in reducing risks for compliant investors. Balancing portfolios based on quality and growth within the constraints of shariah backgrounds was acknowledged as a challenging factor.
The PRI roundtable facilitated an exchange of insights on advancing responsible investments. The discussions covered a wide range of topics, including PRI’s vision, shariah-compliant investments, active ownership, barriers to engagement, and regional perspectives. By leveraging standards, fostering collaboration, and addressing challenges, PRI aims to drive sustainable change and support investors on their responsible investment journey.
