How the Principles for Responsible Investment (PRI) helps insurers get started and make progress in ESG integration

Chris Fowle headshot

Stewart: Who doesn’t want to talk about ESG these days and why not go to the source? Today, we are joined by Chris Fowle of PRI. Chris, welcome.

Chris: Thanks, Stewart. It’s great to be with you.

Stewart: It is great for you to be here. My name’s Stewart Foley and this is The Insurance AUM Journal podcast. Everybody wants to talk about ESG, Chris; but does everybody know what PRI is? Can you tell us? What’s PRI?

Chris: Sure. We are a global organization, a nonprofit. We are a headquarters in London and we’ve been around for about 15 years. We’re a membership model, so a membership-based organization that welcomes three kinds of members, of signatories, as we call them: asset owners, investment managers, and service providers. We support those members as they figure out what ESG means for them. We give them what’s essentially a road-tested framework for how to figure out within their organizational context and with their organizational resources what are they already doing on ESG and how can they improve their practices?

Stewart: I think there’s a lot of misconceptions out there and I hope we get to that. We’re very happy to be a PRI signatory as a service provider so we’re all about it. We have a partnership of sorts, kind of a casual partnership or an informal, but we want to promote this effort in the insurance industry. Your official title is Director of the Americas for Signatory Relations. Where’s your focus these days?

Chris: As Director of Signatory Relations, I’m really a generalist, and I’m helping to manage our relationships across North and South America. As you might imagine, the U.S. is our biggest market, getting close to 800 members in the U.S. alone, a couple hundred in Canada, and rapid growth we’re seeing in South America, especially Spanish-speaking Latiam, but also in Brazil, which is actually one of our oldest established networks.

Chris: It’s probably useful for your listeners to understand sort of the breadth of what I’m helping manage, because every country, every market, even by region within countries, it’s different in terms of thinking about what is the ESG focus these days. You can generalize, for sure, and I think a lot of people know the story about how Europe is more advanced on ESG. That’s true for us, too. I mean, our roots, the reason our headquarters is in London is our roots are over there even though we were initially incubated within the UN.

Chris: As you can tell from our website address, it’s, we were actually part of the UN initially, and then spun out as a nonprofit. In terms of focus areas for ESG, a lot of it started with Europe going back 15 years. The rest of the world has been catching up some parts more quickly than others. So I would say that in Canada, it’s a bit more advanced in terms of having some leadership quality asset owners that are doing quite a bit across a range of ESG issues that have found the resources to be able to dedicate to this area or have done enough broad-based training across their, call it, regular investment professional staff, that they can really feel comfortable saying that they integrate ESG across their assets.

Chris: Now, don’t get me wrong. There are definitely strong organizations in the U.S., as well. You’ll see it, people talk about the coasts in New York, New York State, common retirement fund in the New York city, a couple of the New York city pension funds are doing quite a bit. Then, you’ve got on the West coast, CalPERS and CalSTRS, of course. They bookend the market. They’re the largest public pension funds and a lot of this effort did start with public pensions. But we’re seeing a lot of extension across other types of investors. Certainly, investment managers, the growth there is off the charts and a lot of that’s driven by market dynamics; meaning, people see a growth market and they want to all pile in.

Chris: Frankly, PRI, even though you might think it opens us up to charges of greenwashing and that would be a negative, and of course it is if you’ve been a signatory for a long time and you’re doing nothing, that’s a bad thing and we actively try to combat that. But if you’re just getting started, we’re a big tent organization. We want people to come in. Even if they aren’t doing a lot at the beginning, we want to help orient them, as I’d said earlier, figure out where they are now, what their organizational context and resources are, and how they can move forward. I think it’s important to understand all that to get to the point of your question, Stewart, which was, what are some of the focus areas on ESG? Because now, we’re seeing a lot of interest in particular areas.

Chris: I would say climate would be the number one issue area, and that’s drawing a lot of people into the space. If you put that in the context of insurance companies, general accounts, for example, we’re seeing a lot of activity. Perhaps some of that’s driven by discussions on the regulatory side possibly because they might be getting more questions about these issues and that’s waking them up to certain things. But then maybe the last thing I’ll make on the point and we can weave it into later in the conversation, but the last thing I’ll maybe say is, a lot of these issues are interrelated. If you think about climate, you’re thinking, “Oh, that’s an environmental issue.” But it does have implications for other parts of social issues and governance issues.

Chris: Just quick examples in the social side might be, if you’re talking about a transition to a low carbon economy and that might disadvantage certain sectors, what’s that going mean for the labor market in that sector? That’s an issue connected to a climate issue, for example. Or on the governance side, if you’re thinking about board governance and the quality of your board makeup and whether or not they’ve got expertise in climate, et cetera, that’s a governance issue but related to climate. I think that there’s a broad base awakening around ESG in the U.S. that’s been accelerating in the last couple of years and is extending new types of investors that perhaps haven’t been looking at it as much in the past.

Stewart: Just from your answer and talking about asset managers, have really been a huge source of growth for you, right? Asset owners, that’s where I think, in particular in the insurance industry, and you’ve had a couple of huge wins and I want to talk about those, my perception is that some folks are saying, “You know what, ESG, it’s great, but I don’t want to have to flip a switch and sign on the dotted line that I’m ESG-compliant somehow. Man, that’s going to demolish my book yield and ah, it’s going to … all kinds of terrible things are going to happen.” But that’s a misconception. You’re focused in the insurance industry for the asset owner segment. How are things going?

Chris: It’s, I think, going pretty well compared to the past where there wasn’t a lot of impetus for insurers to take a strong look at this. Their investment management affiliates, yes, right, because of the business driven dynamic of competing for third-party assets and potential clients in Europe, in particular, drove a lot of them to the table to think about these issues and get started. But on the asset owner side, not as much. I think that what has changed is the fact that there’s a broader understanding that what we’re talking about actually are material investible issues, factors, that can affect valuations. It’s not about taking a hit to yield. It’s not about flipping the switch. It’s about taking stock of where you are now, what you may already be doing, and what things you might want to focus on, or get ready for whether it’s regulatory-driven, or whether it’s just like better investment practice, because these are issues business related that are going to have an impact on valuations going forward, whether it’s public equities or fixed income or private markets.

Chris: A lot of these are broad based issues that a good investor is going to need to be aware of. I think more folks are understanding that, and if you’re sitting in the asset owner seat, you’re recognizing that you may not want to just leave it to your third-party managers, or even your, you don’t want your internal staff to go it alone, either. You want to be able to be in the driver’s seat as an asset owner and that’s really central to the PRI thesis, if you will. We believe that asset or sit at the top of the investment chain and ultimately, it’s their fiduciary duty to recognize that these are material issues that need to be addressed. As such, they need to be in the driver’s seat and telling their external managers how to do it, or at least be monitoring what they’re doing on a regular basis so that they’re part of the conversation and not in a sense, just leaving it to chance.

Chris: With that kind of, call it a shift in mindset, people recognize that now is the time. You can’t wait for the perfect. You can’t assume that you’re going to be able to build something and be able to flip a switch. These are challenging issues and there is a learning curve. You’re going to have to roll up your sleeves to a certain extent. But it’s doable and it’s better to get started than to wait.

Stewart: It’s interesting that versus other categories of asset owners, insurance companies have the ability to help themselves on the liability side, by the way in which they invest their assets’ long run. Because climate change clearly has an impact on the claim side of an insurance company. You’ve had some recent wins. We’re actually going to be hosting a podcast with New York CFA society and the folks from Liberty Mutual. We are thrilled to be there with them and that’s been one of your recent wins. Can you talk about that? Also, who else has been most recently become signatories?

Chris: Yeah, sure. I think in line with what I was saying earlier, some organizations are starting to understand these issues, pay more attention for various reasons. I think, in the case of Liberty Mutual, they had some external pressure from stakeholders and others that did make them set up a little straighter and start to take note of these issues. I think then they were looking at what they could do in terms of steps and solutions to perhaps have a more informed view on what SG actually means. In the process of doing so, they made some key hires internally, both on the corporate side and also on the investment side. Those folks were familiar with PRI and really did help organization internally get comfortable with what it meant to become a signatory and ultimately guided them through the process. I think that was very helpful for them.

Chris: We had another recent signatory signup, Mass Mutual. In that case, they actually have an investment management affiliate, Barings, and they have been a signatory for quite some time and have been doing a lot. I think they very likely helped them understand PRI, what it meant, what the obligation is, what you’re committing to, and so they moved forward that way.

Chris: Then, we’ve had others, we just had one in Tennessee, Unum Group, join. Another one in the Midwest, CNO, that joined. There was kind of a lighter touch from ourselves, frankly. I think there, it’s just our efforts in terms of general market education and presence that can get the word out, that kind of word of mouth aspect certainly helps quite a bit. We do connect folks. If somebody wants to have an independent view and talk to somebody beyond ourselves, I think that can always help, too.

Chris: There are a lot of activity going on right now, including inquiries coming in from investment management affiliates of insurers in the U.S. that are interested in becoming signatories. But for them, it’s a bit more challenging because we recently changed the way that insurers can sign up. In fact, those investment management affiliates of insurers now need to get their general accounts to sign up first before they are eligible to do so. Our thinking there has really been, like I said earlier, the general accounts, the asset owners are the ones that are at the top of the food chain. They have the duty to be making these decisions and pushing it through their organizations, including through their affiliates.

Chris: We do require now that the general accounts sign up first, and we think that’ll just be healthier from a governance perspective, number one. But also, number two, avoid confusion in the marketplace where you’ve got one affiliate of a much larger organization that signed up, and then people might assume that the whole thing is signed up and that’s not the case. Instead, they’re at the borders a bit. They wanted to make sure that we avoid confusion that way. That dynamic is occurring, too, now and sometimes you might characterize it as the tail wagging the dog where the affiliates now going to the parent and saying, “Hey, are you aware of PRI?” They’re to your point about how’s that happening? I think that’s the part of the dynamic now, too.

Stewart: Liberty Mutual, Mass Mutual, CNO. Did RGA sign up with you as well?

Chris: Yeah, they signed up a few years ago back in early 2019.

Stewart: Good. There’s some big names, some leaders there. From an asset class perspective, what are you doing with supporting asset classes that are relevant to insurers? Do you have any kind of some examples there?

Chris: Yeah, sure. One area that we’re really excited about, Stewart, is our fixed income work. There, we’ve been leading the market in terms of interactions between investors and credit rating agencies. We started up a sign-on statement a few years back that’s directed towards credit rating agencies signed by investors, investor signatories to the PRI, asking that the rating agencies be more explicit and transparent about how they incorporate ESG factors into their credit analysis.

Chris: Initially, going back a few years now, we were met with some resistance where the rating agencies were saying, “You know, we’re already doing that. Anything that’s a material issue we’re incorporating into our credit ratings analysis.” What we were able to help them understand through creating a lot of direct dialogue between investors and credit rating agencies. By direct dialogue, I literally mean that we set up workshops all over the world where we brought them in person, pre-COVID, together to do these kinds of tough conversations to figure out, “Yeah, you’re doing it but some of these issues are very emerging issues.”

Chris: If you think about climate, it’s new. A lot of the conversation is around: What metrics do we use? What scenario analysis do we use? What is important when it comes to an ESG issue in a particular sector beyond climate? A lot of this is new so investors who were staying in credit rating agencies, we needed to be more transparent and explicit. Fast forward a few years, and now all the major and many regional credit rating agencies are themselves signed on to this initiative and they become close partners and continuing these dialogues to which we have now brought in issuers as well. So you’ve got investors, credit rating agencies, and issuers coming together in sector-focused conversations to really pick apart what’s important and what’s not, and that applies in particular in the fixed income context. That’s probably something of great appeal for insurers, I would imagine.

Chris: Then, we’ve extended our work on sub-asset classes in particular sovereigns, municipal debt, which is a big group here in the U.S., and we’re even looking at structured credit. That’s probably a useful kind of illustration of how PRI operates when it is something newer and people aren’t as familiar with it. One of the things that we’re able to draw on is any progress that’s been made throughout our global signatory base, we can convene working groups, advisory groups, to come together, to figure out what’s missing, to figure out what we collectively can do to progress the conversation and the expertise around these issues, and really bring everything forward. That’s exactly what we’re doing with muni sovereigns structured credit and that’s been really helpful.

Stewart: You have a lot on your plate. That’s a lot of ground to cover. What’s the value proposition of PRI’s reporting framework. It’s interesting, you had mentioned the rating agencies, it seems like there’s some sort of a race to a scoring standard. Then, then others I hear say, “It’s not that simple. You can’t just put a number on it. We’re investment geeks, man. We love putting numbers on stuff and that’s not that simple, is it?” Can you talk a little bit about the reporting framework?

Chris: Sure. Yeah, I’m happy to, and maybe I’ll separate PRI’s reporting framework from the very important conversation around data and ESG ratings versus a traditional credit rating, et cetera, because that’s probably the topic of a whole separate podcast. I can touch on some highlights there, but let me first focus on PRI’s reporting itself because I think you couch it in terms of the benefits of it. I really do feel that is one of the primary benefits of becoming a PRI signatory, is that you get access to this globally road tested framework of how to do ESG integration. We’ve had as a requirement of being a PRI signatory, the reporting element, it’s actually principle six, that you’ll report to PRI and what you’re doing, for quite a few years now. It has evolved and over time we’ve added additional modules, we call them, related to specific asset classes or specific topics like climate, et cetera, that have really helped provide a framework for people to see where they are on these issues.

Chris: One of the outputs of the reporting is an assessment. But this isn’t like a credit rating. It’s not public. It’s not like a naming and shaming rubric. It really is a way for the organization to get feedback on where they are. It’s private. Like it’s meant for the signatory themselves, although, many signatories, investment managers or asset owners, do choose to share their scores publicly and they’re welcome to do that. We don’t require it and we don’t do it ourselves. That’s up to them if they want to share that because we want people to know where they are at a point in time and, like I said, we’ve been doing this for quite a few years. We’d had a lot of signatories progressing up the curve and getting higher and higher scores, even though at certain points, we had tweaked things, either the questions themselves or the scoring methodology.

Chris: This year, in fact, we decided to take a fresh look and we completely revamped our reporting framework to make, it at the end of the day, we hope more decision useful, more streamlined, more relevant and more challenging, frankly. Because like I said, we’ve had many signatories progressing up the curve for quite a few years now. The market has continued to evolve and so we did take the opportunity to reset and make it more challenging. I think when you go in, you’ll see the ability to answer all the basics, cover all the basics in what we call our core questions. Then now, the more challenging part is focused in a section we call the plus section. If you’re doing more and you want to communicate that with your stakeholders, with your clients, with your beneficiaries, with your investment management affiliates, with whomever, you had the ability to do that, too. Then, you can choose whether or not to make that information public as well. You can choose whether to share that information out as I’d said earlier.

Chris: I definitely see it as a primary benefit because you have a chance to orient yourself to a globally road-tested framework and really important understand, Stewart, that it’s not something you have to do on day one. It’s not like you become a signatory and the next day you’re going to be reporting to PRI. Now, we actually have a very robust grace period, we call it, built into the whole signup process where depending on when you sign up, you’re going to get at least a year of grace period. Then, that could be as much as two years, again, depending on when in the year you sign up, so that you have time to start really internalizing a lot of the resources we have, to start to review the questions we’re asking, and really set yourself up for success.

Stewart: I think there’s two things that I really want people to take away. One is that there is a grace period. The second thing that I think a lot of people, me included, didn’t realize is the amount of resources that you have available that are really it’s akin to consulting services almost. You have a lot of tools that have already been implemented elsewhere that people can take advantage of. Those are two really important points. Insurance companies look hard at the climate on their asset side. They look at the liability side. Is that the only ESG issue that they should be focused on?

Chris: No, definitely not. I mean, it always depends on what you’re investing in, obviously. Each issuer, depending on the sector, is going to have its own material issues that you might want to take a look at. I think it’s safe to say that climate is the number one issue area for our signatories, the one that many are facing regulatory pressure around depending on the market. A lot of insurers obviously operate globally and they’ve got sort of CIOs all over the world. Depending on where they are and what they’re investing in, they may already be being forced to look at climate.

Chris: But there are many issues. Right now, there’s this week PRI’s bringing together issues related to supply chain and bringing together issuers in the fixed income space with credit rating agencies and industries, the workshops that I was talking about earlier, and consumer goods. What are the supply chain issues that are being faced by issuers that can have a material impact on valuation? COVID, obviously comes to mind as something short term that’s affecting organizations right now. Labor issues is a big S factor, unionization rates, et cetera, depending on what market you’re looking at, and all kinds of governance issues that can extend to diversity and inclusion. You might have a debate about is diversity and inclusion, for example, is it a governance issue or is it an asset issue? I think that that’s something that really sort of straddles categories as well. Board diversity would be one angle and that’s clearly a G related issue. But if you’re thinking about it from a consumer goods perspective and your reputation in the marketplace, that might be more of an S-type issue.

Chris: It’s hard to pin these things down sometimes, but depending on the sector, you’re going to find material factors E, S, and G everywhere you look, and perhaps given the ubiquitousness of climate and the way it can impact so many parts of our economy and our societies, I think that that is one that does stand out.

Stewart: All right. That concludes the formal part of the conversation. This is the part that is known as let’s get to know Chris Fowle. It is a long weekend and you wake up, it’s Friday morning and you have no unread emails.

Chris: Wow.

Stewart: I know. Can we just take a minute and savor that one right there? What is on the agenda for that long weekend?

Chris: That’s a great question. Well, for the last year or so, I’ve been really lucky to be able to be out in the countryside. I live in New York city, normally in Manhattan, but I’ve been out on Long Island for the last year, and one thing that I’ve really come to appreciate is the ability to go on hikes. You wouldn’t think that there’s a lot to do hiking-wise in Long Island, but you’d be mistaken. It’s a beautiful part of the world and I would say that if I had that kind of open day in my calendar, that is something that I would definitely prioritize.

Chris: Right now, as I’m looking out the window where I am, it’s really beautiful. It’s one of those classic early spring days, I was down by the water yesterday and the spring peepers had come out, those frogs, the sound of which definitely makes me think that spring’s on the way. So yeah, I mean, getting outside, Stewart, that’s the kind of thing that I’m always going to try to prioritize and I feel over the last year, I’ve been really lucky to be able to do a lot of that.

Stewart: That’s awesome. Now, here is the last. This is the final one. Here we go. It is your graduation day and regardless of the festivities that happen the night before, you look bright-eyed and bushy-tailed with your cap and gown. You make it up the stairs, they call your name. The crowd goes crazy. You walk over the university or college president sticks out his or her hand, hands you your diploma, quick photo op, and away you go. You’re walking across the stage, down the steps, and at the bottom of the steps you run into yourself today. What do you tell your 21-year old self?

Chris: Stay on the path you’re on. No, I’ve been feeling lucky again. Two questions in a row, feeling lucky to be able to say that everything I’ve done up to now, I’ve been really happy to have experienced. I mean really historic times, living in New York city, 9/11, coming through all the way till, through the financial crisis, Super Sandy, now the pandemic. Just feeling like being at the center of things that I don’t think I would have given up for anything, frankly. I’ve had some fantastic experiences living overseas as well, which have been really rewarding. I think it’s been a great ride, really enjoying PRI as an organization, as a platform really, for helping investors understand what we actually mean by ESG. What is materially focused, ESG investing, and not only helping improve investment returns, which is ultimately what this is all about, but figuring out ways to also understand the outcomes of those investments and how we’re going to create a more sustainable financial system.

Stewart: Outstanding. Chris Fowle, Director of the Americas for Signatory Relations at PRI. Chris, thanks for being on.

Chris: Thanks, Stewart.

Stewart: Thanks for tuning in. We love to hear your ideas for future podcasts. You can reach us at My name is Stewart Foley and this is The Insurance AUM Journal podcast.

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