By Fiona Reynolds (@fireynolds), Chief Executive Officer, the PRI
The number of topics under the environmental, social and governance (ESG) umbrella is expanding. Emerging ESG concerns such as artificial intelligence, big data and cyber security are attracting more and more investor attention.
Looking ahead to the remainder of 2019 and beyond, the PRI still sees climate change as the number one issue of concern to our signatory base. With emissions on the rise since 2015, we are losing the battle to hold the increase in the global average temperature to well below 2°C above pre-industrial levels. Urgent, immediate action is required.
Last year, the PRI began a new work programme—the Inevitable Policy Response (IPR)—which stated that unless action on climate change is significantly increased, governments will be forced to take sharp, sudden action, which could lead to market destabilisation. Our IPR work will help institutional investors implement processes to build resilience across their investment portfolios, now and into the future.
Many investors are stepping up their activity through initiatives such as Climate Action 100+, the largest corporate/investor engagement initiative to date, and The Investor Agenda, through which investors are disclosing their actions on transitioning to a low-carbon world.
Investors are also concerned about food and agricultural production, which account for about a quarter of all global emissions. Antibiotic misuse and antibiotic resistance is now hailed by the World Health Organisation as on a par with Ebola in terms of the threat to human health.
Another attendant risk around climate change is deforestation and the palm oil industry, which is also widely linked to human rights violations and social conflict. Large-scale deforestation is having a devastating impact on forest peoples and the communities in which they live.
While continuing to address the physical risks around climate change, we also need to consider the impact that the transition to a low-carbon world will have on those working in carbon-intensive industries. Last year, the PRI partnered with the Grantham Institute, the International Trade Union Confederation and the London School of Economics on work around a just transition, to ensure that workers and their communities are not left behind in a zero-carbon economy. The key role of decent work for all in achieving sustainable development is highlighted by Sustainable Development Goal 8, which aims to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”.
The transition to a lower carbon world is not the only change that will affect its workforce. Other challenges in the form of enhanced technological changes, such as robotics, will make today’s labour force unrecognisable and compel employers to seek new workplace models.
Many investors also tell us that looking at ESG factors requires better data. Statistically, too few companies report on their sustainability practices, which means that investors need to get better at requesting this information. Although better data is starting to emerge, investors must not become complacent; everyone needs to take action on ESG issues now.