Constitution of the Principles for Responsible Investment Initiative An investor initiative in partnership with UNEP FI and the UN Global Compact 1
Preamble The Principles for Responsible Investment Initiative (the Initiative) is an investor initiative in partnership with the UN Environment Programme Finance Initiative (UNEP FI) and the UN Global Compact. It is a non-profit unincorporated association by and among the signatories to the Principles for Responsible Investment (referred to herein as the Principles or PRI), representing institutional Asset Owners, Investment Managers and Professional Service Partners (the Signatories). Upon signing the Principles, Signatories commit to implementing the Principles over time and furthering the goals contained therein. This constitution (the Constitution) provides a framework for the co-operation between UNEP FI, the UN Global Compact and the Signatories and defines the governance of the Initiative. Mission The Principles for Responsible Investment Initiative aims to help integrate consideration of environmental, social and governance (ESG) issues by institutional investors into investment decision-making and ownership practices, and thereby improve long-term returns to beneficiaries. Core activities include: Increasing awareness of the Principles and responsible investment in general, and encouraging adoption of the Principles Supporting signatories in their implementation of the Principles through capacity building, information provision and research Networking signatories and facilitating collaboration in PRI implementation 1. Objectives of the Initiative: 1. To support the Principles and to encourage their adoption and implementation amongst investors and their agents; 2. To promote the consideration of ESG issues in all aspects of investment management; 3. To encourage other interested parties including consumers, governments, NGOs and regulators to embrace the spirit of the Principles and to support the efforts of signatories to implement policies and actions that support realization of the goals of the Principles; 4. To co-operate with UNEP FI, the UN Global Compact, and other United Nations programmes and divisions, and any other organisations having similar objectives or interests, to promote the integration of ESG issues into investment management and ownership practices; and 5. In conjunction with UN agencies and others, to conduct conferences, training and educational meetings, as well as dissemination of literature promoting the PRI s objectives. 2. The Nature of the Initiative The Initiative is a non-profit voluntary initiative by and among the signatories to the Principles for Responsible Investment, representing institutional Asset Owners, 2
Investment Managers and Professional Service Partners. It is supported by the UNEP FI and the UN Global Compact and is governed by a board of eleven institutional Asset Owners and one representative from each of UNEP and the UN Global Compact Office (the Board), with administrative and financial arrangements determined by the Board. It is supported by a professional secretariat (the Secretariat). The governance structure recognises the primary role of Asset Owners in the Initiative. The Initiative is established as an unincorporated association under English Law. The Board has the authority to incorporate on substantially the same terms as this Constitution at any time if it finds that an incorporated structure is required for the fulfilment of the Initiative s objectives. 3. Signatory eligibility and classification 1. Signatories must be lawfully established and appropriately licensed investment institutions or service providers, either public or private, which are willing to commit to the Principles; 2. Signatories must sign up across their mainstream investment-related businesses not just particular product lines or services, such as dedicated responsible investment offerings. 3. In order to sign up, approval must come from either the CEO or board of directors level. 4. There are three categories of PRI signatory: a. Asset Owners (as defined below) b. Investment Managers (as defined below) c. Professional Service Partners (as defined below) 5. The general rule is that Signatories self-classify on signing, based on the following guidelines: a. If an organisation manages or controls investment funds, either on its own account or on behalf of others, it would be either an Asset Owner or an Investment Manager. b. If more than half of these assets are owned by the organisation (including in the role of trustee), then that organisation would be classified as an Asset Owner. c. If more than half of the organisation s assets under management are managed on behalf of others, the organisation would be classified as an Investment Manager d. If the organisation does not manage funds, but rather provides services to Asset Owners or to Investment Managers that assist in the fulfilment of commitments under the Principles, then that organisation would be classified as a Professional Service Partner 6. If the organisation or the Secretariat is unsure of the appropriate categorisation, the Board shall have the discretion and authority to determine which category is appropriate. 7. The Board shall have the discretion and authority to determine the suitability of any organisation to become a Signatory. 8. Any dispute as to categorisation of, or suitability for, Signatory status shall be determined by the Board. 9. Signatories agree to the conditions laid down by the Board or approved at the Annual General Meeting (AGM) or other governance mechanisms as defined below, and communicated clearly and in a timely manner to Signatories. Signatories also commit to the following: 3
a. Participation in the annual PRI Reporting and Assessment process; and b. Continual improvement in their implementation of the Principles 10. Signatory status shall cease for the following reasons: a. On the Signatory ceasing to be lawfully established or licensed; b. On the Signatory ceasing business or on its insolvency; c. Upon the Secretariat receiving a written request from the Signatory that it wishes to no longer be a Signatory; d. Upon the Signatory being acquired by or merging with another institution (in such case, the new institution would need to re-sign); e. On the Signatory s refusal to participate in the annual PRI Reporting and Assessment process without a written explanation submitted to and approved by the Board; f. By recommendation of the Board, if a Signatory fails over successive years to progress towards the commitments outlined in the Principles. In such a case, a letter from the Chair of the PRI informing the Signatory will be sent; 11. On cessation of Signatory status, the organisation s name will be removed from the PRI website, and the organisation will no longer have the right to claim Signatory status of the PRI or use the PRI logo or name in any way. 4. Governance of the Initiative 1. The Initiative shall be governed by the Board which may exercise all such powers of the Initiative other than those required to be exercised in the AGM or via Electronic Poll of signatories as defined below, subject to the provisions of this Constitution and to such regulations as may be prescribed by the Signatories in accordance with the governance mechanisms defined in the Constitution. 2. The Board may delegate operational tasks to the Secretariat, and to the UN partner agencies (with the agreement of those UN agencies). 5. Board: eligibility, structure and responsibilities 1. To be eligible for election to the Board, a Signatory representative must be at CEO/CIO/trustee level and from an Asset Owner Signatory organisation. 2. The Signatory organisation putting a candidate forward for the Board must have contributed (or must commit to contributing) the invoiced voluntary financial contribution in the current financial year, and must have participated in the PRI Reporting and Assessment process. This provision may be waived by the Chair for regional Board positions if required to ensure the nomination of regional representatives. 3. A member of the Board has that membership as a representative of a Signatory organisation but has a responsibility to fulfil his or her Board duties in the best interests of the Initiative as a whole. 4. Board terms are as follows: a. Asset Owner Board members shall serve for a period of three years; b. One third of Asset Owner Board members will come up for election each year. c. After serving two terms, Asset Owner Board members may not be nominated to serve a third term without a break of at least one year between terms. 4
d. If an Asset Owner Board member resigns before the end of his or her term, his or her organisation may appoint an alternative representative of the seniority defined in Article 5.1 to serve out the remainder of the term; e. Sunset clause regarding the establishment of a staggered Board: In order to begin the staggered Asset Owner Board process, the first Asset Owner Board members elected in mid-2007 will draw straws to determine whose terms will be one, two or three years. To ensure continuity, the first chair elected will automatically take one of the threeyear positions. These terms would be considered full terms for the purposes of the two-term rule. This clause will be deleted from the constitution once this election takes place. 5. Board members are expected to attend a minimum of two in-person Board meetings and two conference calls per year, with their delegates participating in other meetings when the member is unavailable. If Asset Owner Board members are unable to attend the required meetings for two successive years, their organisation s seat will be vacated. 6. Board members may appoint delegates to attend calls beyond the minimum required. 7. Where any Asset Owner Board position becomes vacant before expiry of the term, and no appointment is made under 5.4.d, the Board will appoint an interim replacement who will serve until the next election, where the position will be added to the other positions for election, with the new member serving out the remainder of the original term. 8. The Board shall consist of 11 representatives from Asset Owner Signatory organisations, plus the Executive Directors from time to time of each of UNEP and the UN Global Compact, who shall each have permanent seats on the Board. 9. Unless otherwise stated, the UN Board members have the same rights as Asset Owners with respect to voting at meetings. 10. Voting procedure for the election of Asset Owner members of the Board: a. The election will be conducted by an independent electoral officer appointed by the Board. A United Nations employee not engaged in the work of the Secretariat is deemed to be independent for the purposes of this provision. b. Only Asset Owner Signatories are eligible to vote for the Asset Owner Board members. c. The voting will be conducted in the two months prior to the AGM. d. Candidates may self-nominate, but require one second from an Asset Owner representative. e. Candidates must have approval from their organisations in order to nominate. f. Candidates will be identified by name, institution and region on the ballot. Candidates will also have the opportunity to include their bio and/or a statement in the materials provided to Signatories in advance of the vote. g. Each eligible Signatory may vote for up to 11 candidates (less any regional positions that are won unopposed). Eligible Signatories may not cast more than one vote per candidate. h. The following regional Board positions will be filled first: i. Europe ii. North America iii. Asia/Oceania 5
iv. Africa/Middle East v. Latin America i. The candidate that receives the largest number of votes from each region above will automatically take the Board position allocated to that region. The remaining six Asset Owner positions will be taken by the other candidates receiving the most votes. j. If there is only one nomination from a region, then that candidate will take the position unopposed. k. If two or more candidates for a regional position have the same number of votes, the winner of that position shall be decided by a random selection procedure such as a coin toss or other method determined by the Electoral Officer. The loser of the random selection procedure will still be eligible for an open position based on his or her total votes. l. If two or more candidates seeking the final open position have the same number of votes, the winner shall be determined by random selection as above. m. All positions are voted on by all eligible Signatories. n. The Board may define additional electoral procedures, consistent with the Constitution, and these shall be included as an appendix to the Constitution and may be amended by the Board at any time. o. If the total number of nominations for the Board is 11 or fewer, then an election shall not be conducted, and those who are nominated are deemed to have been elected. p. If the final number of Asset Owner Board members is less than 11, then Board may coopt additional members from the Asset Owner group for any unfilled positions until the next election, with a priority given to regional representation. 11. On election of a new Board each year, the Board shall elect at its first meeting the following one-year positions from within its ranks: a. Chair b. Treasurer 12. The procedure for Chair and Treasurer elections shall be determined by the Board. Any voting will be coordinated by the Secretariat, and Board members will have the opportunity to vote electronically if necessary. 13. The Secretariat will provide the Initiative s secretary (the Secretary), but will not have any voting rights. The Secretary position does not count towards a quorum. 14. Seven Board members shall be the quorum for the Board in full meeting. Five Board members shall be the quorum for interim conference calls. 15. Any member of the Board may appoint any other member of the Board to act on his or her behalf by proxy by giving 24 hours notice to the Secretary; 16. No Board member shall hold more than one proxy in addition to their own vote. 17. No Signatory organisation shall hold more than one place on the Board; 18. Board decisions should be made by consensus where possible. 19. Where a consensus cannot be reached, questions shall be decided by a simple majority vote, with each member of the Board present in person, or by proxy, or by electronic means, having one vote. 20. It shall be the responsibility of the Board to: a. Develop and propose, with appropriate consultation with Signatories and other stakeholders, amendments to the Principles, with a review once every three years.; b. Oversee the activities of the PRI, including any projects, working groups, task forces and partnerships; 6
c. Provide strategic direction to the Secretariat on the implementation of the work programme, as approved at the AGM, and if and when required, develop and propose additional work programmes, projects partnerships and work streams, d. Encourage and monitor overall progress of Signatories implementation of the PRI; e. Delegate, as appropriate, various responsibilities to a steering committee, the Secretariat, working groups or task forces. f. Provide strategic and policy leadership to the Signatory body on emerging issues around PRI implementation and responsible investment in general; g. Ensure the adequate provision of resources for the implementation of the work programme; h. Propose to the AGM each year a budget that is adequate to carry out the work programme and to arrange the raising of necessary revenues by way of fees, grants and contributions in kind, and to adjust the budget as required throughout the course of the year to ensure the appropriate allocation of resources; i. To provide at least once a year, in liaison with the Treasurer, and for approval at the AGM, a set of accounts clearly showing income and expenditures broken down in reasonable detail, including liabilities and reserves sufficient to show a transparent picture of the finances of the Initiative. Accounts must be in accordance with a publicly accepted accounting practice recommended by the Board and ratified by the AGM. Accounts must be kept transparent and clear in such a way that they reveal the complete picture of all details of the Initiative s finances easily understandable to Signatories. The previous year s full accounts should be presented by the Treasurer at the AGM; 21. Meetings of the Board may take place on the telephone, or by video conference or other electronic means, and shall be convened at such time and place and in such manner as agreed by the Board. 22. The Secretary shall give to each member of the Board not less than 14 days notice of any meeting but the notice may be abridged in the case of an emergency (as determined by the Chair and Treasurer). This provision can also be waived where Board members have three days notice and there is 100% consent to holding such a meeting. 6. Roles and Responsibilities of the Secretariat 1. The duties of the Secretariat shall be as follows: a. To carry out the work programme and activities of the Initiative as agreed by the Board and the AGM; b. To prepare and present to the AGM an annual report covering PRI activities for the previous year; c. In support of the annual report, work with the Treasurer to prepare a financial report for submission to the Board and AGM; d. To work with the Board to prepare and present a year ahead work programme for the AGM; e. In support of the year-ahead work programme, to work with the Treasurer to prepare a budget for submission to the Board and AGM, the forecast income of fees acting as the framework for the budget expenses. 7
f. To organise the AGM and other meetings of the Initiative; g. To coordinate recruitment of new Signatories h. To organise Signatory outreach and training events; i. To coordinate publications, web and other communications strategies; j. To handle enquiries concerning the PRI; k. To prepare minutes of all proceedings of the Board and the AGM and other groups as appropriate. When approved and entered in the minute book these minutes or summary records shall be deemed to be conclusive evidence of the events recorded. Minutes shall be distributed within 14 days of proceedings; 2. Employees or consultants contracted to work for the Secretariat, either directly or through an intermediary, shall be employed in line with procedures determined by the Board. 3. The Secretariat shall report to the Board. 7. Annual General Meeting 1. The AGM of the Initiative shall be held in each calendar year at such specific time and place as determined by the Board: 2. The AGM is open to all Signatories, but only Asset Owner Signatories and the UN Board members are eligible to vote; 3. The notice calling the AGM shall specify the time and place of the meeting and the general nature of the business to be transacted; 4. Three calendar months notice regarding the specific date and location of the AGM shall be given to each Signatory; 5. The agenda, including any issues to be put to a vote shall be circulated at least one month in advance. 6. Asset owner Signatories unable to attend the meeting in person may vote electronically in advance of the meeting on specific questions contained in the agenda. 7. The Chair of the Board will preside over the AGM and if no such chair is available, the meeting will elect one from those present. 8. The Chair will allow any issue to be raised for discussion on the day under the agenda item Other Business ; 9. If for any reason a number of Signatories are not aware of the proposed AGM gathering or its agreed date then the proceedings of the AGM will only be invalidated if more than 15% of the Signatories raise such a concern within one month of their receiving a copy of the final AGM minutes; 10. Any Asset Owner unable to attend the AGM, but who wishes to be represented, may appoint a proxy who shall be entitled to vote on that Signatory s behalf. No Signatory may hold more than one proxy in addition to his or her own vote. Except in an emergency, thirty-six hours clear notification of such appointment identifying such proxy must be given to the Secretary before the meeting; 11. Proposals for agenda items for the AGM will be sought from all Asset Owner Signatories. Proposals must be received in writing by the Secretariat two full months prior to the AGM; 12. It shall be the specific responsibility of the AGM to: a. Approve the minutes of the previous AGM; b. Ratify the results of the election for the Board; c. Propose and approve the work programme for the following year; d. Approve both the previous year s financial report and the budget, and any fees for implementation by the Board for the following year; 8
e. Approve the reports from the Chair, Treasurer and Secretariat, as well as those from the various project groups, working groups, task forces, and regional partners; f. Approve new projects, work streams, working groups, task forces or partnerships and Memorandums of Understanding as proposed by the Board; 13. Each Asset Owner represented by proxy, shall be entitled to one vote on each question put to a vote at an AGM. 14. No business shall be transacted unless a quorum is present when the meeting proceeds to business; 15. Quorum for the AGM will be 15% of Asset Owner Signatories, either in person of by proxy. 16. If within one hour from the time appointed for the holding of the AGM a quorum is not present, the meeting, if convened on the request of Asset Owners, shall be dissolved. 17. A resolution put to the vote of the meeting shall be decided on a show of hands or other appropriate polling method as determined by the Chair. Votes indicated electronically in advance for agenda items will be counted. A simple majority will be sufficient to pass a resolution unless otherwise specified. 18. In the case of a tie vote, whether on a show of hands or other polling method, the Chair of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a cast the tie-breaking vote. This vote will be in addition to the Chair s ordinary vote. 8. Electronic Polls (EPs) 1. Electronic Polls (EPs) of Asset Owner Signatories may be held at such time as the Board may determine; 2. An EP may also be requested by the Asset Owner Signatories provided every such request is signed by at least ten per cent in number of the Asset Owners, and the object of the poll must be stated; 3. Where an EP has been requested by the Board or Signatories, the Secretary must conduct such a poll within 45 days unless otherwise specified by the proponent; 4. Asset Owner Signatories shall have at least 30 days to respond to the poll; 5. EPs shall be circulated to Asset Owner signatories with an explanation of the resolution by the proponents. The positions of any signatories that oppose the resolution shall also be circulated; 6. Unless otherwise specified, EPs have the same status as a resolution at an AGM; 7. Unless otherwise specified, an EP is passed if a simple majority of those that respond, vote in favor of the resolution; 8. To be valid, a resolution must be voted upon by not less than 25% of Asset Owner Signatories. 9. Finances 1. The Initiative currently has a voluntary fee structure. 9
2. The level of suggested annual PRI financial contribution shall be approved by the Board. 3. All Signatories will be invoiced annually. Any contributions will be paid into a trust fund account that has been approved by the Board for the purpose of receiving the disbursing PRI funds; 4. The administrative, operational and treasury needs of the Initiative will be managed in line with the disciplines and procedures governing trust funds of similar non-profit organisations; 5. The Board shall ensure that the Initiative is adequately financed to meet its objectives and shall propose an annual year ahead budget and work programme to be approved by the Signatories at the AGM; 6. The audit and reporting associated with the trust fund established to support the Initiative will be in line with the normal procedures as mandated by the national laws of the country in which the Initiative or its host organisation is incorporated, and good practice in the management of non-profit finances; 10. Changes to the Constitution 1. The Constitution may be amended by a resolution approved either by not less than 50% of the Asset Owner Signatories for the time being at an AGM or by not less than 67% of the Asset Owner Signatories for the time being by an Electronic Poll. 2. Minimum participation for any constitutional amendment to be valid is 50% of Asset Owner signatories. 11. Changes to the Principles text 1. Changes to the Principles text shall be led by the Board and conducted through wide consultation with signatories and other stakeholders. 2. Any changes to the Principles text must be proposed by the Board after such consultation, and the procedure to be followed for its amendment is the same as for changes to the Constitution. 12. Intellectual Property Use of each of the United Nations, UNEP, UNEP FI and Global Compact names and logos are governed by their respective logo use policies. 13. Indemnification The Initiative shall indemnify, hold and save harmless, and defend, at its own expense, each of the United Nations, UNEP, UNEP FI, the Global Compact Office, its officials, agents, servants and employees from and against all suits, claims, demands, and liability of any nature or kind, including their costs and expenses, arising out of acts or omissions of the Initiative or its employees, officers, agents or sub-contractors, in the performance under this Constitution. The obligations under this Article do not lapse upon termination of this Constitution. 14. Binding Effect of Constitution 10
Signing the PRI shall constitute an agreement between the Signatory and the Initiative to be bound by and to comply with this Constitution (as altered, revoked or added to from time to time), with such agreement to have effect from the date of admission and to terminate upon such Signatory resigning or being deprived of membership (providing that the Signatory shall on resignation or deprivation of membership remain responsible for its obligations incurred prior thereto). 15. Dissolution 1. The Initiative may at any time be dissolved by a resolution following the same procedure as a change to the Constitution as defined in Article 10 above. In addition, the resolution to dissolve the initiative must also be debated and passed by a simple majority at an AGM; 2. Following the passing of a resolution pursuant to paragraph (1) above and notwithstanding the dissolution of the Initiative, the Board shall be entitled to exercise all such powers and to do all such acts as shall be necessary for the proper and orderly winding-up of the business of the Initiative; 3. Each of the UNEP FI and the UN Global Compact can unilaterally terminate their respective relationships with Signatory organizations, by act of either of their official representatives. 4. Termination of this agreement by UNEP FI and/or the UN Global Compact would terminate any authorization that had been given to use the name and logos of the United Nations, UNEP, UNEP FI or the Global Compact. 16. Notices and Language 1. Notice may be served on a Signatory in writing, facsimile transmission or email sent to the nominated person at the address or number of the Signatory as appearing in the records of the Secretariat; 2. Any notice to the Initiative in writing or by facsimile transmission or email shall be addressed to the Secretariat; 3. Mindful of resource constraints and noting the desirability of establishing multilingual capacity, the business of the Initiative shall be conducted in the English Language. However, efforts should be made by the Secretariat to ensure that implementation resources are translated into relevant languages. 17. Construction If any question arises as to the construction and interpretation of the Constitution or as to any matter arising there from such question may be determined by the Board, without reference to a particular legal jurisdiction and any such determination, whether express or implied from the proceedings of the Board, shall be conclusive and binding for all purposes. 11