From PRI Chair Martin Skancke and PRI CEO Fiona Reynolds
The unfolding of the COVID-19 pandemic over the past months has exacerbated systemic environmental, social and governance issues across the globe. From inequality to decent work and working conditions, social protections, access to healthcare, climate change and environmental impacts, the crisis has unveiled substantial shortcomings within the global financial system, our economies and society more generally.
At the PRI, while we have continued to work on major projects and new initiatives this year, we have also focused our attention on the implications of the pandemic and the role that sustainability can play in building a better future. After convening a series of signatory engagement groups to determine short- and long-term investor priorities, we have worked to help signatories in their immediate ESG responses and planning for a sustainable longer-term recovery.
COVID-19 is not a single crisis, but rather a convergence of health, social and environmental crises, which have disproportionately impacted our society’s most vulnerable.
As the PRI we have never seen investors, businesses and governments so engaged around sustainability issues – a reflection of the fact that the health of our people, planet and global economy are invariably connected. We have seen record levels of investor engagement and take-up of sustainability strategies.
As we look toward a recovery, which must be sustainable, green and inclusive, it is critical that we widen our perspective and recognise that the current situation also presents us with an opportunity to build back better. How we choose to respond over the coming few years will shape the future of our economy and society for decades to come.
Governments cannot fund the transformation we need alone – businesses and investors must also be part of the solution. As such, the role of our signatories is more important than ever, and the PRI will continue to play its part ensuring that the investor voice is heard, and that sustainability continues to be part of the solution.
A growing signatory base
Despite the pandemic, our signatory based has continued to grow over the past year. The collective AUM represented by PRI signatories increased by 20%, from US$86.3 trillion to US$103.4 trillion as of 31 March 2020, representing 3,038 signatories.
The number of investor signatories increased by 29%, to 2,701, of which 521 are asset owner signatories.
In January we welcomed our 500th asset owner signatory – corporate pension fund Protección SA – with their addition also marking our first asset owner signatory in Colombia. We were also delighted to have debut signings from asset owners in Singapore, Portugal, China and Uruguay.
This also reflects our growing efforts to support signatories in emerging markets, where we have seen net growth this year. Recognising that issues such as climate change and a lack of progress against the SDGs disproportionately impact emerging markets, we have made a concerted effort to work with those signatories to mitigate any likely negative effects and help them adapt and respond to opportunities through responsible investment.
Connecting with signatories digitally
We have substantially revitalised and built upon our established communication channels – particularly in social media – and launched new digital platforms, all of which have been vital over the past few months for ensuring that we could continue to support signatories in being responsible investors.
We took the difficult decision to postpone the next PRI in Person conference, originally due to be held in Tokyo this October, until 14-16 September 2021. We have, however, maintained our commitment to convening and educating responsible investors, by expanding our digital events calendar, including webinars and roundtables. In the coming months, we will host a series of three digital events across multiple time zones.
Urgent climate action
This year we have launched or made progress on several key initiatives that seek to support investors in taking ambitious climate action, including Climate Action 100+, the UN-convened Net Zero Asset Owner Alliance, the Task Force on Climate-Related Financial Disclosures and the Inevitable Policy Response.
PRI is one of the founders of Climate Action 100+, the world’s largest investor‐led engagement initiatives. With more than 450 investor signatories representing more than US$40 trillion in assets under management, it aims to ensure that the world’s largest corporate greenhouse gas emitters take necessary action on climate change. This year it secured public commitments from energy companies Shell and EDF and shipping group Maersk, among others.
The UN-convened Net Zero Asset Owner Alliance, launched in September 2019 and co-convened by the PRI alongside UNEP FI, now has 27 members, representing over US$4.6 trillion in assets under management.
We have called on governments to implement the Paris Agreement and step up their ambition, while seeking to empower investors to an act on climate-related risks and opportunities.
Our focus on climate action is reflected not only in the materials we have produced and events we have hosted, but also in the way we assess the progress signatories make on adhering to the Principles. This year we made reporting on three TCFD-aligned climate change indicators mandatory for the 2020 reporting cycle, resulting in 2,097 signatories reporting on climate, up from 591 in 2019.
Reporting and accountability
To meet our Blueprint commitment to increase accountability, we have continued to engage with signatories not meeting the minimum requirements first introduced in the 2018 reporting cycle. These extensive and successful efforts have included one-to-one meetings, webinars and improved reporting definitions/documents.
In 2018, we engaged with 121 signatories, of which 69% went on to meet the minimum requirements in 2019. The following year, we engaged with 123 signatories – 83% of these met the minimum requirements in 2020. A small number of signatories will, for the first time, be delisted for failing to meet the new standards, following two years of unsuccessful engagement with us. The final list will be published in September.
We have also completed an extensive signatory consultation on reporting, which has led to the development of a new PRI Reporting Framework. It will include core and plus components, covering the process of responsible investment and the outcomes of those processes on the real world. This will be piloted in the 2021 reporting cycle.
Sustainable Development Goals
COVID-19 has brought social issues such as a lack of a social safety net, worker protection and human rights more generally into stark focus, making the need to meet the Sustainable Development Goals (SDGs) ever more urgent.
Enabling investors to have tangible, real-world impacts that are aligned with the SDGs is a key focus for us, demonstrated by the publication of a major report – Investing with SDG outcomes: A five-part framework. This paper aims to help investors understand how they can contribute to the world meeting the SDGs by increasing the positive outcomes and decreasing the negative outcomes arising from their actions.
It is only the beginning in bringing together thinking on ESG risks and opportunities with thinking on the potential to shape outcomes. We will now assist signatories – including through working groups and case studies – on implementing all aspects of the framework. To support reporting and disclosure, the revised PRI Reporting Framework will start to include questions on outcomes.
The road to recovery
As we look ahead at how to ensure that a post-COVID world delivers prosperity for all, we are developing our next three-year strategy, which we will open for consultation at the annual Signatory General Meeting, which will be held digitally in October.
As always, input from our signatories is invaluable in determining what our key areas of focus should be, what we have done well and where we need to continue to improve.
We look forward to receiving your input and continuing to work together to advance our mission to achieve a sustainable global financial system that benefits the environment and society as a whole.
Martin Skancke, Chair
Fiona Reynolds, CEO