Last month, Harvard University joined more than a thousand other global investment institutions that have signed the UN-supported Principles for Responsible Investment. For students and staff who advocate Harvard’s divestment from fossil fuel companies, signing the PRI may appear to be a small and incremental step. However, as the founding Executive Director of the PRI who has spent the last decade promoting responsible investments within mainstream institutions, I believe it is a huge step forward—and its implications shouldn’t be underestimated.

The Principles for Responsible Investment were launched by Kofi Annan in 2006 at the New York Stock Exchange. The six aspirational principles include commitments to incorporate environmental, social and governance issues into investment decision-making and ownership practices. Signatory institutions also commit to encouraging transparency from the entities in which they invest and being transparent themselves.

It is important to recognize that the principles are not based on ethical or normative standards, but are very much process based. It doesn't mandate divestment of “unethical” companies, but rather commits signatories to understanding a range of issues that investors have traditionally ignored, and then making investment decisions based on that understanding. For example, a typical implementation of the principles might involve hiring dedicated staff with expertise on sustainability issues, buying in research on different themes, and incorporating that research into investment decisions. It also commits investors to engaging in dialogue with investee companies (shareholder engagement) where issues of concern have been identified.

While these types of activities may appear incremental, my experience has been that when an organization puts in place systems and staff to implement the principles, it typically results in a vast improvement on “traditional” investment in terms of sending signals to companies that sustainability and good governance matter to shareholders.

So why is Harvard signing the PRI a huge deal, both for Harvard and the responsible investment movement overall?

First, the PRI is a public commitment backed by a mandatory reporting framework. Given Harvard’s high profile, it is unlikely that it would have signed if it weren’t serious about implementing the principles. Institutional change takes time, but the hiring of a VP of Sustainable Investing followed by signing the PRI six months later shows that things are starting to move.

In addition, it will set an example for other endowments. While many pension funds and fund managers have embraced responsible investment, most endowments have shown little interest. Harvard’s is the largest U.S. university endowment in the world, and the first to sign the PRI (see full list of signatories). Leadership and peer pressure are key in moving responsible investment forward; after the largest pension fund in Brazil signed the PRI, the rest of the industry followed. Now companies controlling 60 percent of pension assets in Brazil have signed. Similar examples of leadership resulted in major shifts in attitudes in Australia, South Africa, Japan, Canada and much of Western Europe.

And investment managers and consultants follow their clients. There is an entire sub-industry of fund managers, consultants, and advisors who serve the endowment market. Most of these organizations are yet to engage meaningfully with responsible investment. Harvard’s public commitment to this agenda is likely to catalyze dozens of new responsible investment products and services.

The PRI is a legitimizing tool for internal champions who want to push things forward. Institutions are not monolithic. There is a broad spectrum of competing views within institutions and the PRI empowers those pushing for change. The PRI’s UN backing and the size and legitimacy of its existing signatory base make responsible investment the norm, undermining those who still believe that there is no place for social issues within investment management.

The PRI prioritizes transparency. Endowments, including Harvard’s, have traditionally been woefully opaque. In most cases, secrecy and opacity have a lot more to do with culture than a genuine investment rationale. While it won’t happen overnight, the PRI’s mandatory transparency framework should result in a dramatic increase in transparency around investment processes, and more importantly, start to change attitudes towards openness and transparency. Before the PRI, the number of mainstream investors reporting anything on sustainable investment could be counted on two hands. In 2015, more than 1,000 PRI signatories will be reporting their responsible investment activities and progress in quite some detail to the public.

The PRI has a strong focus on shareholder engagement—that is, engaging proactively with investee companies on environmental and social issues across all asset classes. While climate change is hugely important, there are also many other issues that responsible investors are engaging with investee companies on, including human rights and labor standards in supply chains, gender diversity on corporate boards, anti-corruption, biodiversity loss, excessive executive remuneration, conflict minerals, corporate sustainability reporting, and more.

If Harvard gets serious about shareholder engagement, joining with the most progressive pension funds and fund managers around the world, and brings its endowment peers along, it would make a major contribution to the signals being sent to the corporate sector about investors’ concerns about sustainability and good governance issues. Given its large private equity, timberland, and property allocations, it has even more potential influence on investee companies than most institutional investors.

A real commitment to implementing the PRI by Harvard—even though it does not yet include divestment from fossil fuel companies—does represent a major step forward in terms of the responsible investment of the entire portfolio. I predict we will see a lot of progress over the next year, not only at Harvard but also within the endowment space overall. Time will tell.

Dr. E. James M. Gifford is Senior Fellow at the Initiative for Responsible Investment at the Harvard Kennedy School.