Collaborative Sovereign Engagement on Climate Change

The initiative aims for investors to work collaboratively to support governments to take all possible steps to mitigate climate change, in line with investors’ fiduciary duty to mitigate financial risk and maximise long-term value of assets. This includes supporting countries to hold the increase in global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit this to 1.5°C, consistent with their commitments to the Paris Agreement, where applicable.

The initiative began in July 2022, with participating investors engaging with sovereign entities, officials and policymakers in the Australian system. In 2025, the PRI is also establishing a full engagement programme in Canada and a preliminary engagement programme in Japan.

Signatories interested in future opportunities to participate in the initiative can join the waiting list to be directly contacted as they arise.

For more information, please contact [email protected]. 

Why is this collaborative engagement needed?

Climate change issues are a material threat and generational opportunity for investor portfolios. Through sovereign engagement, global investors seek to reduce risk associated with worsening global heating and maximise the opportunities arising from the transition to a net-zero global economy, including where related to:

• The value of sovereign debt investments;
• The continued competitiveness of national economies and investee companies; and
• Systemic risks and opportunities through exposure to the global economy.

This engagement is consistent with investors’ fiduciary duty  to address climate-related risks and opportunities by supporting governments in meeting the commitments to the Paris Agreement objectives, where applicable, and ensuring a just and orderly transition to net zero. This is recognised by the growing number of investors that now explicitly factor in sovereign climate performance to their investment decisions.

Additionally, at an estimated US$60 trillion, sovereign debt accounts for a large share of global assets under management. It is essential that investors consider addressing climate risks associated with this asset class to achieve their net zero commitments.

Creating opportunities for dialogue between governments and investors enables sovereigns to articulate their approach to managing sustainability risks, investors to voice support for action, and both sides to gain a deeper and more common understanding of related risks and opportunities. This allows governments to more effectively create enabling economic environments for private finance through better informed decision-making on public expenditure, policy and regulation. In turn, such dialogue supports governments to accelerate their transition to net zero by crowding in private sector investment.

Through collaboration, the initiative also aims to unify and amplify the messaging of global investor sovereign engagement.

Engagement focus areas

Through mutually beneficial engagement, participating investors are supporting sovereigns to:

• Close the gap between current action and a Paris-aligned emissions reduction trajectory, where applicable;
• Establish a detailed, credible and economy-wide net zero transition plan with supporting policy mechanisms, budget expenditure and investment structures;
• Build greater climate adaptation and resilience across the economy and community to avoid worsening disruption and damage from physical risks; and
• Improve disclosure of sovereign exposure to climate risks and opportunities consistent with international standards.

The Australian engagement programme

In 2022, Australia was chosen as the initial market for engagement as it has historically performed poorly against peer nations on climate and environmental measures in sovereign risk ratings.

27 international investors are now participating in the Australian engagement, collectively responsible for $9.5 trillion* in assets under management, listed in the table below. Each investor is a participant in the Australian engagement’s Investor Working Group and engages through the initiative as a member of one of three thematic sub-groups focused on different parts of the Australian system:

• National governments
• National regulators and authorities
• Sub-sovereigns

The strategy and activities of the engagement programme are overseen by the Australian Advisory committee. The PRI will also establish an Australian Technical Advisory Group in 2025 which will provide technical expertise on climate policy and sovereign engagement.

Since launching, participating investors have supported sovereign entities, officials and policymakers develop credible and effective climate policy action at a critical juncture in Australia following the introduction of the 2022 Climate Change Act and other major reforms.

In June 2024, the PRI published the first progress report on the initiative’s activities to date, summarising key successes, challenges and lessons, and the positive feedback from participants. It highlighted the outcome of an external review that found that the initiative had provided significant value to participating investors and demonstrated an effective model for collaborative sovereign engagement that could be replicated in additional markets.

Signatories that are on the initiative’s waiting list will be contacted about future opportunities to join the initiative as and when further opportunities arise.

The Australian engagement Advisory Committee is currently made up of the following members:

• Thomas Dillon, Aviva Investors
• Malika Takhtayeva, BNP Paribas Asset Management
• Reina Berlien, Brandywine Global Investment Management, LLC
• Akaash Sachdeva, HESTA
• Peter van der Werf, Robeco
• Richard Proudlove (Observer), IGCC 

Australia Investor Working Group Participants
Achmea	Colchester Global Investors	Neuberger Berman
AllianceBernstein	Fidelity International	Pendal Group
Ardea Investment Management	HESTA	QIC
Australian Ethical	IFM Investors	Rest
Aviva Investors	Insight Investment	Robeco
BNP Paribas Asset Management	Jupiter Asset Management	Schroders
Brandywine Global Investment Management	LGPS Central	Sumitomo Mitsui Trust Asset Management
Brown Advisory	Morgan Stanley Investment Management	TCW
Candriam	Munich Re	T.Rowe Price

Canada

The PRI is now establishing a full engagement programme for the Canadian system.

The Canadian engagement will be structured similarly to the Australian engagement. This will be supported by an Advisory Committee, Technical Advisory Group and Investor Working Group to carry out the activities of the programme.

Canada has been selected as a focus market after significant research and consultation with signatories. This involved developing a quantitative model to identify markets where engagement would have the greatest scope to address investor exposure to climate-related risks and opportunities. Upon this research, the PRI initiated an extensive consultation with its signatories to understand the level of interest, their preferences and where such a programme could provide the greatest value for them.

Japan

The PRI is establishing a preliminary engagement programme in Japan. This focus market was selected because of investor interest and research suggesting that an engagement programme could provide value for signatories in mitigating financial risk and maximising long-term value of assets.

The Japanese engagement will be conducted as a preliminary engagement in the first instance, with a view to assess longer-term viability and value of the initiative in the market to support dialogue that is constructive for both PRI signatories and sovereign entities.

The Japan Signatory Advisory and Working Group will oversee the Japanese engagement programme and conduct the day-to-day activities of the engagement. 

Additional market engagements

Any further market engagement programmes that are established within the initiative will also use a similar methodology. This involved a quantitative model that the PRI developed with its signatories to provide a first-pass assessment view of the level of investor exposure to climate-related risks and opportunities across markets. This model will provide the basis to apply a series of qualitative overlays to help determine which markets hold prospects for constructive and ongoing engagement.

Any future expansion of the initiative will be subject to signatory interest, sufficient resourcing and qualified coordination support in place to sustain the engagement.

The choice of any focus markets should not be interpreted as a reflection of these countries’ climate policies or as an overall negative assessment of their progress to date. The PRI recognises that all countries are navigating a complex transition to net zero from different baselines, governance systems and economic positions. Consistent with the purpose of the initiative, the intention is to enable investors to constructively seek dialogue with sovereigns to assist them with ongoing feedback on evolving capital market practices and views that can help with navigating this transition.

More information on the PRI’s model for market selection is available here.

* The parties management of these assets is subject to any client mandate and any legal, regulatory, fiduciary or other professional obligations that apply to them. The parties retain their discretion to act independently in the best interests of their clients and beneficiaries.

The parties’ adherence to the initiative’s Participant and Advisory Committee Terms of Reference is subject to any client mandate and any legal, regulatory, fiduciary or other professional obligations that apply to them. The parties retain their discretion to act independently in the best interests of their clients and beneficiaries.

Disclaimer

The Collaborative Sovereign Engagement on Climate Change initiative (the initiative) is committed to compliance with all applicable laws and does not seek, require or endorse individual or collective decision-making or action that is not in compliance with those laws. Signatories are independent fiduciaries responsible for their own investment and voting decisions. The use of engagement tools and tactics, including the scope of participation in engagements is at the discretion of individual investors and subject to all relevant laws, including competition and antitrust laws. The initiative facilitates the exchange of public information, but participants must not share or exchange non-public, competitively sensitive information. Participants must avoid coordination of strategic behaviour that impacts competition. Participants must make independent decisions regarding next steps and how they will pursue them and are encouraged to consult their own counsel as appropriate.

The initiative does not act or speak on behalf of participants. Participants also do not seek directly or indirectly, either on their own or another’s behalf, the power to act as proxy for a security holder and do not furnish or otherwise request or act on behalf of a person who furnishes or requests, a form of revocation, abstention, consent or authorisation. Participants may not claim to represent other participants, the initiative or the PRI or make statements referencing other participants, the initiative or the PRI without their express consent.

The initiative does not provide investment, legal, accounting or tax advice.

Whilst the PRI has exercised its best efforts, it makes no warranties, express or implied, or representations as to the accuracy, reliability and completeness of any information provided on this website. The initiative does not necessarily endorse or validate the information contained herein.

The Terms of reference, responsibilities, rights and other information contained elsewhere herein are intended to be interpreted in a manner consistent with the foregoing.