Pakistan’s 1st signatory to the UNPRI would further the reach of responsible investment
Lifeworth Associate Hanniah Tariq returned to her home country of Pakistan to do some pro-bono work advancing responsible investment there. We are delighted that through her efforts even challenging conditions such as those faced by Pakistan at present, need not be barriers to responsible investment and we hope, such investment strategies might support progress in Pakistan. What follows is her summary of that work so far.
“I have been supporting a Pakistani investment fund in becoming aware of and familiar with the United Nations Principles on Responsible Investment (UNPRI)[1]. The aim is to help this fund in becoming a signatory and actively support the network and agenda in the Pakistani context.
At the beginning of the process, a dialogue was initiated with:
a) The Chairman/Managing Director and;
b) The Head of Corporate Governance and Corporate Affairs
(Both these players were kept in the loop from the beginning to insure upper level championing as well as implementation support during the process of signing up if the initiative was to go ahead).
The initial meetings were carried out with both to gauge the level of interest/ awareness in the organization about their principles regarding responsible investment and the benefits of signing up to the UNPRI. The process was then continued in an informative fashion with briefs prepared covering:
* Influence on returns
* Influence on brand
* Costs of signing
o staff,
o financial and;
o implications for fiduciary duty
* Internal Procedure for signing up
The information was then collated and presented for consideration to the Board of Directors on the 20nd of January 2010. The issue was passed unanimously and the Board was pleased to allow the company to become a signatory to the UNPRI. The matter was resolved further in the decision taken by the Board to authorize the Managing Director to be able to approve all necessary steps, measures and actions necessary to comply with the formalities needed to join the signatories of the UNPRI.
I am pleased to mention at this point that the fund that I have been talking about is the National Investment Trust limited (NITL), Pakistan’s first open ended mutual fund established in 1962 with the objective of stabilizing and developing the equity markets in the country. Over the course of its existence it has evolved into the country’s largest Asset management company, operating a number if funds in the category of Equity, Bond and Income.
The fact that the NITL has taken the step to become the first signatory in the region to this voluntary initiative on responsible investment has various positives.
Positive implications:
For the fund:
Influence on returns: Implementing the Principles will lead to a more complete understanding of a range of material issues, and this should ultimately result in increased returns and lower risk. There is increasing evidence that ESG issues can be material to performance of portfolios, particularly over the long term[2] .
Performance: through signing on the UNPRI the fund will have access to the latest research and tools for assessment of ESG issues and frameworks.
Influence on brand: The NIT would be the first asset owner to sign up not only in Pakistan but all of South Asia, and hence has the opportunity to emerge as a leading voice on environmentally and socially responsible investment as well as serve as an example and a conduit for UNPRI and other potential signatories in the region.
Networking: Building networks at the PRI in Person Annual Event bringing together signatories.
For the investment environment of the country:
Increase the visibility of the principles and environmental, Social and governance issues in the country’s investment landscape:
* With investments in Equity of 430 companies and Directorships in 140 companies, the NITL can have influence in improving the ESG structure if a significant population of the country’s companies.
* Considered a leader in the Mutual fund industry of Pakistan the NITL can influence other investment management companies in the country to consider supporting responsible investment in the country
Increase the visibility of the Pakistani investment industry in the globalised context and the international responsible investment dialogue through having an opportunity to be part of a global forum on the issue.
Platform for advancing north-south dialogue: At the PRI in Person Annual Event signatories get the oppurtunity to unlfuence the dialogue on responsible investment through brainstorming on implementation strategies, network and partners.
For the Initiative/ partnership
Local platform for engagement: Through having this large mutual fund as a signatory the UNPRI has a platform in Pakistan for increasing its visibility as the NITL can
* have influence in increasing awareness of the initiative in its investees and directorships
* can use its influence with other investment management companies in supporting the UNPRI.
Next steps:
Following the approval of the board, a letter to intent signed by the Chairman/ MD has been sent to the Executive director of the UNPRI secretariat. The next steps under way at the NIT include internal research on the following themes (staff time and my consultation time has been allocated to formulate a report covering the following by 5th Feb 2010):
* Gauging level of gap in current practice towards implementing the 6 principles in NIT operations
* Understand the types of activities that are suggested in the Principles,
* Investigate how other investors have used them
This information will then be used to begin the implementation process of the principles in the NIT from the date of approval of PRI membership.
So summing up…
Pakistan is now ready to have its first ever organization to step up in the international arena and voluntarily commit to integrating the consideration of environmental, social and governance (ESG) issues into its investment decision-making and ownership practices.
With more funds and management companies signing up, the country’s the investment environment could not only be able to project a responsible image globally but begin to shape what ESG means to themselves if enough interest is generated to be able to create country network. Ones present at the moment in Brazil, South Korea and South Africa are shaping the agenda by (in addition to promoting the principles in their regions etc) by committing to capture evolving best practice on how to factor ESG issues into investment processes and to implement the Principles[3] in their own contexts.
[1] www.unpri.org
[2] http://www.unpri.org/faqs/
[3] http://www.unpri.org/files/SA_network_final.pdf
Hanniah can be contacted via our contact form.
http://www.lifeworth.com/consult/connect/
