By Fiona Reynolds (fireynolds), CEO, PRI
COP26 and climate action
With COP26 in Glasgow only a few weeks away, climate mitigation remains a significant focus for investors and the most urgent existential challenge facing society. The recent Intergovernmental Panel on Climate Change (IPCC) report indicates that we will surpass 1.5 degrees of warming by 2040 if we continue our current trajectory. Unsurprisingly, the report has been described by UN Secretary-General António Guterres as ’code red for humanity’ and highlights the need for investors to take urgent action in the race to zero emissions.
At the PRI, we are prioritising the need for bold action at COP26, focusing on raising government and investor ambition on the road to zero emissions. To achieve net zero, we need to see near-term commitments, with businesses and non-state actors halving their emissions by 2030. We also hope to see an increase in public finance commitments for developing countries as they transition their economies and continue to grapple with climate change. As a member of the Race to Zero campaign and the Glasgow Financial Alliance, we continue to send a strong message of our commitment to net zero by 2050 and hope to see real commitments to phase out and ultimately end fossil fuel use and subsidies.
Ahead of the Conference, we continue to see investors taking a strong stance on climate and are proud partners of the Investor Agenda who recently announced the second wave of signatories to the 2021 Global investor statement to governments on the climate crisis. The statement now has 587 signatories representing over $46 trillion in assets and calls on governments to raise their climate ambitions by passing strong policies and committing to mandatory climate risk disclosure requirements aligned with the TCFD.
Climate Action 100+’s investor signatories are also demanding increasing climate ambition from large corporate emitters. In August, they launched the Global sector strategies, a new workstream that outlines investors’ expectations for corporates in building effective climate transition plans and decarbonised value chains. As a founding investor network of CA 100+, we published Recommended investor expectations for net zero aviation and worked with CERES to develop the Recommended investor expectations for food and beverage.
As investors take increasing action on net zero ambitions, the demand for decision useful ESG information is growing at an unprecedented rate. In July, we hosted a webinar with US Securities and Exchange Commission Chair (SEC), Gary Gensler, to discuss the SEC’s request for comment on mandatory climate reporting. In response to this request for comment, we surveyed our US signatories and found nearly 90% of respondents want the SEC to move forward with mandatory climate disclosure requirements.
Finally, in preparation for COP26, on 20 October, we are co-hosting the sixth and final event in the PRI and LSEG Investor action on climate series covering Industrial transition to net zero - how can business and the investment sector come together to achieve global decarbonisation? This event will bring together the various climate investment and finance initiatives through the prism of investor-corporate engagements. It is a critical jumping-off point ahead of the Conference, examining the status of shareholder engagement, active ownership approaches and how both sides can contribute to achieving a step change at COP26.
Engaging on plastic packaging
In addition to climate change, plastic waste and pollution present an ever-evolving, systemic risk for investors. To address these issues, this quarter we developed practical engagement guidance for investors, based on extensive research and inputs from PRI’s Plastics investor working group and aligned with the Ellen MacArthur Foundation’s New plastics economy global commitment. The pioneering guidance enables investors to ask companies the right questions about their activities in relation to plastic waste and pollution, assess their performance and spur them to take bolder action towards a circular economy for plastics.
Reporting and Assessment next steps
As I’ve outlined in my previous communications, our pilot framework presented challenges and the process for some signatories has been far from seamless. We received feedback on the reporting pilot from more than 1,700 signatories. Issues with specific areas in the reporting system resulted in some signatories not being able to submit a complete dataset, affecting the 2021 data quality. To complete the feedback review process and fully address the identified issues, we are now taking a staged approach to release the 2021 outputs and delaying the next reporting cycle until 2023.
Delaying the next reporting cycle will allow us the time we need to incorporate signatory feedback on content, to reduce the burden of reporting—including pre-filling of answers—and to significantly improve the user experience for 2023.
This month, Transparency Reports will be released privately in the new data portal. We will ask that signatories check their responses for gaps or errors, allowing four weeks for you to review and request changes to affected indicators. We will then make the changes for you. Signatories will not have to re-enter any information in the online tool themselves.
We intend to deliver the public Transparency reports and Assessments by June 2022, or earlier if possible, however at this stage we do not know how many data gaps will require updating. While we hope this process will take less time, all signatories’ data gaps must be addressed before we can launch the public reports and provide signatories with their annual Assessment.
We have also designed new reports and assessments for this year. The reporting was calibrated to make it harder to get the highest marks and we need to ensure that we have time to work with signatories on the new outputs. It is also important to note that new signatories who would have reported voluntarily in 2022 will have their grace period extended to 2023.
I want to thank all our signatories again for their continued patience and understanding throughout the entire process.
Later this month we are delighted to be hosting the PRI Digital Conference, which is set to be our largest event to date. We have an exciting programme and roster of speakers lined up to explore this year’s theme: building a sustainable future. We will cover a diverse range of ESG issues from climate change and human rights to tax fairness, as well as the latest updates in responsible investment practice. We will also announce the winners of the PRI 2021 Awards at the Conference.
The full agenda is now live and you can explore the sessions in more detail and discover all the speakers confirmed to take part. Don’t forget to register for free on the conference website to secure your place to join the more than 5,000 attendees already signed up.
This follows on from our second virtual Signatory General Meeting (SGM), an important forum for dialogue between the PRI Board and our global signatory base, which we hosted last month. At the meeting, Martin Skancke and I presented an update on PRI’s progress in implementing our three-year strategic plan and provided highlights of our work over the past year. We also hosted a Q&A session with signatories.
While of course we missed meeting our signatories in person, by hosting the SGM virtually and across multiple time zones, we enabled a wider audience to join us, and were delighted to have 581 signatories in attendance this year. A recording of the SGM will be available shortly on the PRI website and you can access a more comprehensive update of our progress in the 2021 PRI Annual Report.
Signatory growth continues at a steady pace, with our six-month growth rate currently at 14.23 percent. We now have 4,375 signatories to the PRI who collectively represent US $121.3 trillion in AUM. This includes 218 new joiners in the past quarter, of which 29 are asset owners, such as: Equitable Holdings Inc, Higo Bank Corporate Pension Funds, La Mobilière Holding Ltd, University Pension Plan Ontario, Prudential plc, Fondo Pensione Fon.Te., La CIPAV, The Finnish Climate Fund, Sava Insurance Group and many more.
CEO search progress
Last but certainly not least, the search to recruit my successor continues to progress, with interviews taking place this month facilitated by Saxton Bampfylde and the Board search committee, led by Chair Martin Skancke. The Board search committee is aiming to make an announcement of the appointment in the next month.
A reminder that I will stay on as CEO until the New Year to ensure continuity and enable a comprehensive handover to take place. In the interim, for any questions about the search process please continue to contact us on [email protected].
This blog is written by PRI staff members and guest contributors. Our goal is to contribute to the broader debate around topical issues and to help showcase some of our research and other work that we undertake in support of our signatories.Please note that although you can expect to find some posts here that broadly accord with the PRI’s official views, the blog authors write in their individual capacity and there is no “house view”. Nor do the views and opinions expressed on this blog constitute financial or other professional advice.If you have any questions, please contact us at [email protected].