Quarterly update: Blueprint and climate change top of our agenda.
After nearly 20 roundtable events and considerable input from signatories, last month we launched the Blueprint for responsible investment, our mandate for the next decade. Building on many aspects of the PRI’s core agenda, it sets out how we will tackle the world’s sustainability issues – including climate change – through nine priority areas.
Just as we launched the Blueprint, the FSB Task Force on Climate-related Financial Disclosures’ final reportmade recommendations about how the investor community can respond to climate risk and opportunity. It marks a vital step forwards on climate action, providing a common language for investors and companies on the issue. The PRI has also lent its support to an investor letter to the G7 and G20, urging them to stand by their commitments to the Paris Accord.
Along with Carbon Tracker, we’ve just launched 2 degrees of separation: transition risk for oil & gas in a low carbon world. It ranks the oil and gas industry company by company and identifies where shareholders’ money could be most exposed to the low-carbon transition.
Another issue our Blueprint addresses is accountability. We therefore welcomed the Financial Conduct Authority’s report on the asset manager sector, which made recommendations on fees, as well as the role of consultants. We’ll be addressing many of the issues raised through our sustainable financial system programme. Watch this space.
Significant activities on the ESG front
One of the major announcements during Q1 of the PRI’s new financial year was the news that the US was withdrawing from the Paris Accord. While this did not come as a surprise to many of us, it was nonetheless disappointing. However, we have found that this has actually galvanised investors to work harder on climate-related activities; in fact, a number of G20 countries, most notably China, have vowed to take the lead on climate and green finance activities. The PRI recently participated in a green finance summit organised by the City of London, where several investor-led panels confirmed that appetite for green finance instruments, such as green bonds, is growing rapidly.
During the quarter, we launched our long-awaited project on building a more sustainable financial system, which we announced last year at PRI in Person. The SFS work is core to the PRI’s Mission, which says that we are committed to building a more sustainable financial system. It will be a long-term project and will engage many stakeholders including pension funds, fund managers, regulators, policy makers, lawyers, consultants and others.
Because the issue of fiduciary duty remains a roadblock for ESG integration in certain countries, we are continuing to publish our series of country roadmaps, with the most recent covering Japan and Germany. The roadmaps follow on from Fiduciary duty in the 21st century and make recommendations to ensure institutional investors understand that their fiduciary duties require them to consider material ESG issues in their investment and decision-making processes
It’s no secret that the “S” is often considered to be the “orphan” when it comes to ESG, with investors finding it easier and more financially relevant to look at the “E” and the “G”. To try to redress the balance, we launched ESG integration: how are social issues influencing decisions? It proved immensely popular with investors and has been downloaded over 1,500 times.
Finally, we launched a new and exciting programme with the CFA Institute to collaborate on a global study on ESG investing in a move to determine how widely ESG issues are used by mainstream investors.
While ESG strategies have gained considerable ground over the last decade, many investors do not yet make it standard practice to look at ESG considerations across all of their asset classes. We hope this collaboration will determine the depth of the remaining barriers to ESG integration, particularly on the part of investment managers.
Update on new signatory growth
In the first quarter, 79 new organisations joined the PRI. We saw particularly strong growth in the US – where we now have well over 300 signatories – and Asia, where we were delighted to welcome E Fund as our fifth investment manager signatory in China. E Fund is one of the largest asset managers in China with US$145 billion AUM and 57 million investors.
A quick look ahead
We will review the EU’s High-Level Expert Group on Sustainable Finance interim findings, which will be released in mid-July. The PRI is an international observer to the group and has been supporting their work since January.
For the rest of the summer, we will be focusing on our flagship event, PRI in Person. We are extremely pleased that Christiana Figueres will be presenting our closing keynote address. Register now.
We will also be turning our attention to Climate Week in New York, where we expect to see a number or states and cities in the US declare their support for a transition to a low carbon world.