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March 06, 2009

PRI Encourages Investors to Take More Active Ownership Role
    by Robert Kropp

Principles for Responsible Investment publishes eight-point plan to help institutional investors avoid the pitfalls that contributed to current economic crisis. -- As owners of the financial institutions whose practices led to the economic crisis, institutional investors must accept a share of responsibility, according to the Board of the United Nations-backed Principles for Responsible Investment (PRI), which released an eight-point plan for institutional investors to respond to the crisis.

According to the PRI Board statement on financial crisis, investors must take responsibility for protecting their investments and ensuring that their agents act in their best interests.

The Board of the PRI asserted that the Principles provide a robust framework for assisting investors in their response to the crisis, and called on institutional investors to work together to improve risk management practices and create a culture of active ownership.

The eight-point plan espoused by the Board calls on institutional investors to see responsible investment as an important response to the current economic crisis and to increase their investment in activities that enhance understanding of environmental, social, and corporate governance (ESG) issues. Investors should become signatories to the PRI as well, said the Board.

Institutional investors should provide agents such as fund managers with concrete incentives to help them better understand ESG issues, and invest in active ownership by monitoring their investments and engaging as activist shareowners in their portfolio companies.

The plan also calls on institutional investors to engage with regulatory agencies to ensure that consideration of ESG issues is part of the solution to the crisis, and to publicly disclose their responsible investment activities.

Donald MacDonald, Chair of the PRI Initiative, said, "We believe this current crisis could have a catalytic effect of shifting the mainstream investment sector towards more responsible investment practices. Institutional investors can make a positive contribution to rebuilding trust and confidence by taking action in support of our eight-point plan."

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