KLD and the Principles for Responsible Investment (PRI)

KLD and the Principles for Responsible Investment (PRI)

KLD Research and Analytics, Inc. is proud to be a charter signatory of the Principles for Responsible Investment (PRI). The PRI call on investors to incorporate environmental, social and governance (ESG) factors into their investment practices, and to work together for better reporting and disclosure of ESG performance.

Since 1988, KLD has supported investors’ analysis of non-financial corporate performance. KLD’s products and services can help investors and corporations fulfill the promise of the PRI.
KLD actively supports implementation of each of the Principles:

Principle #1: We will incorporate ESG issues into investment analysis and decision-making processes.

For investors to incorporate ESG issues into investment analysis, they need reliable, objective data. The SOCRATES database is the foundation of KLD’s product line, and SOCRATES provides the most comprehensive solution to PRI’s call for deep integration of ESG factors into investment analysis.

SOCRATES is a web-based platform of research on more than 4,000 companies in 50+ global markets. KLD evaluates over 3,000 U.S. corporations for social and environmental performance on more than 280 data points using a proprietary ratings process covering community relations, corporate governance, diversity, employee relations, human rights, product impacts, and the environment.
SOCRATES provides its users:

In-depth company research reports, ratings and analysis
Sector reports and analysis
Identification of company violations of global norms and conventions
Details of company involvement with major ESG controversies
Data feeds for integration into clients’ trading, compliance, and research platforms

KLD supports ESG integration with product strategies tailored to the needs of:

KLD Indexes, a unit of KLD, uses SOCRATES as the basis for the construction and maintenance of its family of 21 indexes. KLD Indexes develops and licenses a range of benchmark, strategy and custom indexes that support the integration of ESG factors into investment decisions.

Principle #2 We will be active owners and incorporate ESG issues into our ownership policies and practices.

The practice of “active ownership” demands that investors know more about the companies whose shares they own. KLD supports active ownership with products that detail the what, where and how of each company’s operations.

KLD’s company and portfolio reports provide transparency about corporate activity, identify industry- and region-specific best practices, and can be used to engage with companies to improve corporate ESG performance and disclosure. SOCRATES clients can set pass-fail screens to determine if a company meets investors’ parameters. Clients can also benchmark corporate ESG performance against sector peers to identify leaders and laggards on critical issues. SOCRATES also tracks current and historical ESG shareholder resolutions at each company.

KLD Consulting supports active ownership with customized engagement tools to align with investors’ particular strategies and objectives. Consulting products and services include: portfolio audits, universe reviews, buy lists and restricted lists; specialized issue research; social investment policies and screening guidelines; customized company reports; and social investment products for financial institutions.

In partnership with leading proxy consultant Glass, Lewis & Co., KLD also provides a Proxy Voting Guidelines Service. The Service enables automatic ballot instruction and proxy vote execution in accordance with KLD guidelines. These guidelines cover both management and shareholder resolutions on a broad range of ESG topics.

Principle #3 We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Through direct engagement with researched companies, KLD encourages better corporate reporting on ESG and sustainability efforts. This outreach is an integral part of the research and index development process.

KLD’s analysis includes objective evaluation of corporate reporting, including goals and mechanisms to measure and track appropriate disclosure on ESG issues. KLD research tracks corporate compliance with environmental, labor, and NGO codes, standards and initiatives. SOCRATES profiles also note third-party verification of corporate claims and participation with advocacy organizations such as the Global Reporting Initiative (GRI), Ceres, and the Carbon Disclosure Project.

Principle # 4 We will promote acceptance and implementation of the Principles within the investment industry.
Principle # 5 We will work together to enhance our effectiveness in implementing the Principles.
Principle # 6 We will each report on our activities and progress towards implementing the Principles.

As one of the first research firms to focus on socially responsible investing (SRI), KLD’s business model is founded on broader adoption of the ESG-focused investment strategies called for by the Principles.

KLD promotes PRI acceptance and implementation by participating in industry networks and initiatives including the US Social Investment Forum (SIF), UKSIF, EuroSIF, the Social Investment Research Analysts Network (SIRAN), the Interfaith Center on Corporate Responsibility (ICCR), Ceres and PRI. KLD is a founding member of CERES and has been an active ICCR participant since its founding in 1988.
KLD is a widely recognized authority on ESG issues. Over 40 peer-reviewed academic studies have cited KLD research, representing finance, economics, management, and sociology. Both the trade press and general media frequently contact KLD staff for expert comment.

KLD also works to promote industry-wide implementation of ESG investing by sponsoring and/or participating in major conferences and forums worldwide. These include ESG and sustainability events and others that serve the broader investment community, including forums of pension managers, institutional investors and independent advisers in the US, Europe, and the Asia-Pacific region.
In 2006, KLD, Standard & Poor's, and CRISIL Ltd. were awarded the IFC's "Capturing Value" grant. The grant has supported the creation of an emerging markets index and ESG research on companies in India.

KLD’s benchmark and strategy indexes provide investors with important comparative performance data and benchmarks. For example, KLD’s Global Sustainability Index is a benchmark index that seeks to hold a representation of strong environmental, social and governance (ESG) performers across all sectors in North America, Europe and the Asia-Pacific region. By enabling the integration of ESG factors into a broad investable universe, the GSI and other indexes track progress toward PRI implementation.

KLD reports on ESG developments with the KLD Blog, which presents timely, fact-driven analysis and commentary for both our clients and the larger investment community. KLD.com also provides updates on KLD and industry news and developments, as well as additions and changes to KLD’s product lines.

In recognition of KLD’s work, both for our clients and throughout the global business community, IPE/TBLI granted KLD its 2007 Leader Award for Outstanding Contribution to ESG.

For more information, please contact Randy O'Neil at (617) 426-5270 ext.6701 or email roneil@kld.com.