Creating long-term value requires a sustainable global financial system
To challenge the barriers to a sustainable financial system, we have committed to:
- addressing key obstacles to creating the sustainable financial system that long-term investment performance requires;
- championing changes that would promote long-term investing;
- targeting behaviours, practices and incentives that create short-termism.
Signatories engaging with policy makers (2018 - 2020)
For the first time, more than half (51%) of reporting signatories indicated that they engage with policy makers, compared to 47% in 2018/19.
Global policy engagement programme
We continue to engage with policy makers around the world, with a focus on the European Union, China, US and UK.
Policies and briefings
We prepared 11 briefings and submitted 34 consultation responses last year. These focused on several areas, including:
- the EU Sustainable Finance Taxonomy;
- the US SEC Shareholder Proposal Rule;
- the UK Stewardship Code;
- ESG disclosure in China;
- pension reform in Colombia and New Zealand; and
- European credit rating disclosure requirements.
For a full list of briefings and disclosures, visit PRI policy consultation responses, briefings and letters 2019.
Global Policy Reference Group
We continue to support a Global Policy Reference Group to:
- strengthen our, and our signatories’, public policy engagement on responsible investment topics;
- encourage greater alignment between our signatories’ responsible investment commitments and public policy efforts; and
- ensure that the global regulatory environment is aligned with the PRI’s mission and Principles.
A list of members can be found here.
A legal framework for impact
This year we established a flagship project, A Legal Framework for Impact, in partnership with UNEP FI and Generation Foundation, to examine the extent to which law and regulation enable investing for sustainability impact. The focus in 2019/20 was on laying the groundwork for the project; including appointing law firm Freshfields Bruckhaus Deringer to deliver the report. In the coming year we will deliver the report and full analysis and recommendations for policy change where analysis determines that legal impediments are restrictive for investors seeking to incorporate sustainability impact in their investment decision-making. The project covers 11 countries.
Other policy work
We set out recommendations to ensure that investors can scale up their contribution to the EU Green Deal and sustainability goals more broadly. Policy staff were recruited in Paris and Berlin. We also engaged around investor disclosure rules.
We engaged with government, regulators and other stakeholders to push for policy reform in three key areas:
- creating a world-leading Stewardship Code and an effective regulatory framework for stewardship;
- improving governance standards at UK pensions and reducing market fragmentation;
- removing barriers to green finance and improving climate disclosures.
We have been particularly active in making TCFD adoption mainstream. We participated in two government-convened working groups developing TCFD guidance for investors and has convened investors and policymakers to overcome barriers to implementation. More detail on our TCFD work can be found here.
Our policy work in China focused on corporate ESG disclosure and promoting responsible investment guidelines and regulations, including stewardship, for asset owners and asset managers. In 2019/2020, we published three reports and organised 12 events with investors, regulators and policymakers on these topics.
On corporate ESG disclosure, our key recommendation to the China Securities Regulatory Commission (CSRC) is to develop a mandatory, standardised disclosure framework to provide investors with comparable, investment-grade ESG data. To support our recommendation, we published research on ESG data in China and a technical briefing on how to design and implement an ESG disclosure policy.
We also published ESG and Alpha in China to explain why investors need ESG data and a standardised ESG disclosure framework. The research was based on MSCI ESG data and included examples of ESG incorporation strategies by five asset managers in China.
In collaboration with the Climate Action 100+ programme, we engaged with investors and regulators on the value of promoting stewardship for Chinese asset managers.
Our next steps are to continue promoting ESG incorporation regulations for asset owners, stewardship guidelines for asset managers and to develop research and recommendations for real economy policies aligned with sustainable, net zero economy by 2050.
In the US, our policy work has focused on three major areas:
- protecting investors’ rights to engage in active ownership by filing shareholder proposals in the face of proposed regulatory changes by the Securities and Exchange Commission;
- educating policymakers on the implications of applying proposed regulations of proxy advisory firms that would impede investors’ access to impartial proxy voting advice; and
- advancing policy reforms aimed at providing investors with access to consistent, comparable ESG data from public companies.
Conversations about ESG disclosure and sustainable finance received increased attention in the US House of Representatives, which held two hearings on ESG disclosure and several ESG disclosure bills were introduced.
We held our first policy event in Washington, DC, the US Sustainable Finance Policy Summit. Attendees included signatories, policymakers, supporting organisations and media. Senator Brian Schatz (D-HI) and Representative Sean Casten (IL-06) offered remarks on climate risk disclosure and sustainable finance. A distinguished panel of signatories made up of representatives from CalSTRS, GPIF, PIMCO, the European Commission and Freshfields discussed sustainable finance policy in the United States, and other discussions focused on:
- the importance of ESG integration and fiduciary duty;
- the need for consistent, comparable ESG data;
- universal ownership; and
- long-term investing.
In the final weeks of the fiscal year, the US economy began to shut down in response to the COVID-19 pandemic. Major shifts in the trajectory of US policy are possible in the coming year as policymakers work to address the fall-out of this global health crisis. Going forward, the extent of progress made on our policy priorities will be dependent on the outcome of the presidential election in November, which could lead to major changes in the composition of leadership in Washington.
We have also sought to support sustainable finance policy developments in other regions. In Japan, we contributed to the evolution of best practices in governance and stewardship, particularly with regards to the understanding and uptake of the TCFD recommendations and the update of the Stewardship Code.
In Australia, we supported the development of governance guidelines and participated in the Australian Sustainable Finance Initiative (ASFI), leading to the publication of the ASFI inaugural sustainable finance roadmap.
In South Africa, we provided guidance on policy developments including collaborative engagement on ESG issues and the establishment of a green finance taxonomy.
We have also provided input on several policy consultations worldwide, including on fiduciary duty in New Zealand and Colombia, corporate reporting in Hong Kong and Chile, and the stewardship code in Russia.