PRI Hedge Fund Guidance

Overview

The PRI has published a new guide, Integrating Sustainability and Governance Across Hedge Fund Strategies, designed to help hedge fund managers and investors navigate responsible investment in a way that reflects the realities of the sector.

For years, one of the key challenges in applying sustainability considerations to hedge funds has been the diversity of strategies involved. Equity long/short, global macro, credit, event-driven, quantitative and multi-strategy funds all operate differently, use different instruments and have different opportunities to influence outcomes. As a result, a one-size-fits-all approach has rarely been effective.

The PRI's new guide acknowledges this complexity and provides practical examples of how sustainability considerations can be integrated across the investment process, from asset selection and portfolio construction through to risk management and stewardship activities.

Importantly, the guide goes beyond direct investment decisions and also explores how hedge fund managers can strengthen wider responsible investment practices across their organisations, aligning with the PRI's Six Principles.

A practical resource for the industry

We welcome the publication of guidance that recognises the unique characteristics of hedge fund investing rather than attempting to apply traditional long-only frameworks without adjustment.

Daniella Woolf, CEO of Danesmead Advisory and Co-Chair of the PRI Hedge Fund Advisory Committee, was involved in developing the report.

Commenting on its release, she said:

"Given the wide range of hedge fund strategies and potential asset classes, applying a blanket responsible investment approach to 'hedge funds' has always been problematic. This guide is super helpful for navigating the nuance between strategies and considering how different responsible investment tools can work for them."

The guide provides a useful framework for both allocators seeking to evaluate managers and hedge fund firms looking to enhance their sustainability and governance approaches in a manner that is proportionate, practical and aligned with their investment strategy.

Why this matters

As investor expectations continue to evolve, hedge fund managers are increasingly being asked to demonstrate how sustainability considerations are incorporated into decision-making processes. Managers also need approaches that reflect the realities of their investment strategies rather than forcing them into models designed for fundamentally different asset classes.

The PRI's latest publication represents an important step forward. By recognising the diversity within hedge funds and providing strategy-specific guidance, it offers a more practical roadmap for integrating sustainability and governance considerations across the sector. For managers and investors, that nuance is exactly what's been missing.

Read the full PRI guide here:
https://www.unpri.org/deep-dive?id=integrating-sustainability-and-governance-across-hedge-fund-strategies

For more information on the hedge fund guide or PRI, please get in touch.