Reflections on PRI In Person Toronto 2024

11 Oct

Delegates from across the globe gathered in Toronto this week for the PRI’s 16th in Person Conference. The PRI is gearing up for its 20th year (2026), and the vibe on responsible investment at this conference is overwhelmingly positive and high energy, all the while acknowledging the challenging geopolitical backdrop for ESG. But the 150 speakers have an easy ride as they’re preaching to 2,000 converted delegates, all eager to find out what’s next in ESG, which regulations will hit them next, and most importantly, how to progress responsible investment to make a difference. Greenpeace demonstrators appear outside the event, calling for further regulation of the banking system – this doesn’t seem like it’s the crowd that needs convincing.

Key themes and soundbites from the conference can be summarised in four powerful words: Regulation, Urgency, Progress and Action.

Regulation

Capacity and expertise are major issues that organisations are struggling with as they seek to comply with waves of additional regulation. They should not be pulling resources away from those implementing sustainability to do this reporting. Reporting needs to involve more than just sustainability teams – it should include finance, risk, compliance, legal, investment teams. Senior sponsorship is key, and people need to be trained.
A panel of global regulators, including the FCA’s Director of ESG, Sacha Sadan (a regular on the ESG speaking circuit) noted that what sustainable finance regulation needs now is assurance – confidence that disclosures are accurate. And not just limited assurance, but reasonable assurance. The market wanted labels, so the FCA created the SDRs – the market said the bar was too high, but the FCA is standing firm to maintain the quality and integrity of the framework.
Canada’s Deputy Prime Minister Chrystia Freeland announced the launch of Canada’s own Climate Taxonomy for Sustainable Investing (which sounds rather like the FCA’s SDRs) – guidelines to identify sustainable and transitioning investments, as well as mandatory climate disclosures for certain businesses.

Urgency

Mark Carney’s keynote speech highlighted that time is running out for capital markets to make a difference on sustainability. This transition has the scale of the industrial revolution, at the pace of digital transformation. Current net zero policies are insufficient to meet the pledges made by countries across the world (with the exception of Denmark, well done Denmark). There are major gaps in data, action and investment.
For investment returns, go where the emissions are, and get them down. Don’t overcrowd the companies and sectors that are already there. Don’t just decarbonise the portfolio, decarbonise the real economy.
Clean energy investments will reach $2tr this year, but this is only half of what’s needed. CalPERS plans to double climate investments in the next 6-7 years.
Headlines on the anti-ESG movements in the US are loud and prominent, but markets are driven by environmental and social risks. When these factors break down, the markets break down. Systemic risk results in non-diversifiable risk in capital markets, investors want to improve the resiliency in these systems.

Progress

The UK was the first G7 country to close its final coal fired power plant.
Canada’s carbon emissions fell for this first time this year since COVID.
Norway has more electric vehicles on the road than petrol cars.
>50% of new cars sold in China are now EVs.
>50% of the world’s invested assets are committed to the PRI’s principles.
>50% of banks are now signatories of the new Principles for Responsible Banking.
Over 20 jurisdictions accounting for >50% of the global economy have taken steps towards committing to ISSB, this includes G20, G7 and EM nations – the vast majority targeting full compliance with ISSB standards.
The NZDPU platform will cover 10,000 major companies globally and acts as a centralized repository of company-level greenhouse gas emissions data. Launching in 2025, if a company is not in this database, they’re not taking climate action seriously.

Action

The PRI placed a strong focus on Progression Pathways, and reinforced that the framework is not intended to become a de-facto labelling regime (I personally think this is inevitable). The pilot framework will be released in 2025, and we plan to work on mapping signatories across to the Progression Pathways as soon as possible. 2025 reporting remains stable, 2026 introduces new foundational reporting, and 2027 introduces new Progression Pathways reporting.
Ask companies to report on ISSB, hold directors accountable to provide transparency.
CSRD is an EU reg which is going to impact thousands of UK, American and Canadian companies, be aware of extraterritoriality of regulation, aiming to drive global convergence.
Biodiversity - company transition plans need to include nature and biodiversity. A local case study explained that Quebec has 70% of the Maple Syrup market – what would happen if something happened to the Maple tree?
Greenhushing is now a bigger problem than Greenwashing – watch out for this.
Some organisations have deprioritised DEI, with headwinds based on claims from a McKinsey study (which was based on corporate entities and is widely disputed). But allocators still very much care about DEI at investment managers and claim that having around 30% diversity on investment teams is valuable to avoid group think.
We don’t have to wait for regulators to make things happen. Investors, ESG ratings, and companies can push things to happen quicker.
Not having an emissions target in the next couple of years will be a problem.