Quarterly update: climate activity firmly on the agenda

As usual, we produced reports, organised events, and provided outreach on a wide range of ESG issues, from climate change to labour in the supply chain to cybersecurity.

We’re also delighted to let you know that we currently have over 200 registrations for PRI in Person 2018. As you know, we opened registration early this year in anticipation of a very busy event that overlaps with Governor Jerry Brown’s California Climate Summit. 

We are expecting another record turnout for PRI in Person so anyone who has not yet registered their interest to apply for a place is urged to do so here.

Quarterly overview

Towards the end of last year, we were particularly busy on the climate front. First, with COP23 and then with the Macron One Planet Summit, at which we launched the Climate Action 100+ initiative, an initiative to get investors engaging with the world’s biggest emitters of CO2.

Despite the lack of action in the US on climate initiatives, other countries are taking climate commitments seriously. In October, we took part in the Global Invest Forum in Paris, the leading French event for investment managers. Coming just before COP23 and the Macron One Planet Summit, it was interesting to see the high level of commitment to responsible investment that French investors are making.

Similarly, at the GEA International Conference in Tokyo, which was attended by Prime Minister Shinzo Abe and Their Imperial Highnesses the Crown Prince and Crown Princess, the prime minister reaffirmed Japan’s commitment to climate change. The Japanese government has committed to establishing a long-term strategy that carefully looks ahead to the future, and aim to realise a carbon-free society that is unmatched in the world.

Our new reporting cycle is now open and as promised, we have now aligned our Reporting Framework to the TCFD recommendations announced last June. We think this will send an important sign to investors that they need to ask companies to disclose more information on how they are transitioning to a low-carbon world; investors also need to hold themselves to account on their own climate policies.

The PRI’s work on building a more sustainable financial system, which will be a core focus for us for the next several years, saw the publication of our first piece of work in this area, looking at the role of investment consultants. As many of you know, some investment consultants remain sceptical about the benefits of looking at ESG issues. We hope to break down those barriers through our ongoing work.

We are still facing the issue of too many financial professionals only considering short-term views – and being incentivised for doing so. Our seminal work which we published in tandem with PwC – Coping, shifting, changing – explored corporate and investor strategies for managing market short-termism.

In a similar vein, we explored the investment case for the SDGs. The SDGs represent the globally-agreed world’s most pressing environmental, social and economic issues and as such serve as a list of the material ESG factors that should be considered as part of an investor’s fiduciary duty.

Fiduciary duty also remains a contentious issue in some countries. Last year, we were pleased to see the European Commission looking to make further clarifications around ESG and fiduciary duty. The public consultation on this issue closes on 22 January and the PRI has been busy preparing its responses.

Finally, we have been focusing more attention on S-related issues, which can be more difficult to quantify than the E and the G. We hope that our reports looking at responsible labour practices in the apparel sector and managing ESG risk in the supply chains of private companies and assets will hope to focus more attention on S issues.

Update on signatory growth

In 2017, the PRI’s signatory base grew by over 15%, representing faster growth than we have seen in several years. In the last quarter of the year alone, we added 70 new signatories.

Regional growth was particularly strong in Asia last year, both in Japan, where we added 10 new signatories (up 20%) and in other Asian markets, where we added 24 new signatories (up 60%). Key new Asian signatories in 2017 included Japan Post Insurance, Nippon Life, Rohkinren Bank and Mitsubishi UFJ Kokusai Asset Management in Japan, China Asset Management and E-fund Management in China, Khazanah Nasional Berhad in Malaysia and PT ASABRI in Indonesia. We expect the addition of our new head of China, Nan Luo, will make a real difference in terms of our strategic outreach in China.

We also continued to see strong growth in the US where, despite the pushback from President Trump on environmental issues, investors continue committing to responsible investment. 

The PRI welcomed 57 new signatories in the US in 2017, including the San Francisco Employees Retirement System, Mercy (first health system), and Bloomberg LP Retirement Plans, the second US corporate plan and managers including Fidelity Investments, Federated Investors, Inc, and Oppenheimer Funds.

A quick look ahead

As we look ahead to the beginning of 2018, we continue our climate work.

Along with Ceres and a number of other climate groups, we will be attending the Investor Summit on Climate Risk, which takes place in New York City on 31 January and at which we will be having a call to action for investors around a number of existing climate initiatives.

We are also continuing our work focusing on asset owners and will shortly be releasing our asset owner strategy guide, How to craft an investment strategy and consider the real-world impact.

Over the next few months, we will be holding roundtables on ESG in credit risk and ratings, following up on our ESG in Credit Ratings Initiative, which aims to enhance the transparent and systematic integration of ESG factors in credit risk analysis.

All in all, it is shaping up to be another busy year for the PRI. We look forward to working with our signatories on many of these initiatives.