Principles for Responsible Investment (PRI)
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The PRI supports the launch of the COP26 finance agenda
Fiona Reynolds (@Fireynolds), CEO, PRI
COP26: time for finance to take the lead
Yesterday marked the official launch of the COP26 private finance agenda, a dedicated track spearheaded by Mark Carney, Governor of the Bank of England, UN Special Envoy for Climate Action and Finance and the Prime Minister’s Finance Adviser for COP26.
Finance and climate leaders gathered at the inaugural event in London on Thursday, emphasising the critical importance of collective financial sector action in addressing climate change.
Setting out the scale of the challenge ahead, Sir David Attenborough screened a sneak preview of his new film A Life on Our Planet. When released in April, it aims to increase public understanding of what is truly at stake if we don’t act. It was a compelling call to action, and I urge everyone to see it.
Governor Carney encouraged the audience to take up Sir David’s call to action, reminding us that ‘achieving net zero will require a whole economy transition.’
‘Every company, every bank, every insurer and investor,’ he said, ‘will have to adjust their business models. This could turn an existential risk into the greatest commercial opportunity of our time.’
David and Mark
L-R: Sir David Attenborough and Mark Carney. “Achieving net zero will require a whole economy transition,” said Mr Carney
The Right Honorable Alok Sharma MP, COP26 President and Secretary of State for Business, Energy and Industrial Strategy articulated the UK government’s clear vision for COP26, highlighting decarbonisation as the future and the importance of a fair transition with no one left behind. For investors, he noted, this will require a focus not simply on returns, but also on impact. And Christine Lagarde, President of the European Central Bank echoed the role of investors in relieving the current funding deficiency through financing the transition.
Throughout the event there was a recognition of the costs of ignoring climate risks and the need to be adequately informed and prepared, which was clearly articulated by Mary Schapiro, Head of the Task Force for Climate-Related Disclosures (TCFD) Secretariat.
There was also an evident understanding that COP26 success will be dependent, as Sir Roger Gifford noted, on the public and private sectors working together. And David Blood, Founder of Generation Investment Management conveyed the urgency of the situation in saying that the time has come for transformational, not incremental, change.
With the private finance agenda now formally launched, the road ahead becomes one of accelerating action toward delivery and at PRI we are gearing up for this opportunity.
PRI was mentioned many times throughout the launch, and I’m delighted that finance will play a key role at COP26 in Glasgow. This is the first time a host government for the COP has fully recognised the critical role that finance has to play alongside state actors and sought to prioritise its contribution.
COP26 in November will serve as an important moment for global climate ambition from governments and the private sector alike. In addition to pushing for strong government action, PRI will actively support finance sector leadership and the key themes of reporting, risk and returns; public finance; and innovative finance.
How will we do this?
PRI forums, webinars and events in the leadup to COP26 will have a focus on global climate ambition and investor action toward net zero. We will invite a range of leading investors to share their experiences, informed by the real actions they are taking on climate change.
The UN Net Zero Asset Owner Alliance will demonstrate asset owner leadership on net zero and highlight the art of the possible. The Alliance is working hard on implementation and will make its approach toward net zero available for all PRI signatories to learn and build from.
No matter what stage investors are at, there are steps they can take to advance in climate action. To help dive implementation, PRI will provide guidance to our signatories on practical actions they can take on the path toward net zero.
Risk, reporting and returns
For the first time, all our signatories must complete mandatory PRI climate reporting indicators based on the TCFD by the 31st of March this year. Through our Climate Reporting Leaders Board and Climate Snapshot Report we will then seek to highlight leading practices.
Reporting is not an end-goal in itself, but it serves to hold up the mirror to investors on where they are in climate risk management. Forward-looking climate risk assessment holds the key to breaking the tragedy of the horizons. PACTA, a climate scenario analysis tool endorsed by PRI, can also help in this. And additionally, the Inevitable Policy Response (IPR), can support boards in considering how prepared they actually are for a delayed, abrupt and forceful policy response.
The Climate Action 100+ initiative offers a way for investors to join together to encourage companies to manage climate risk at a board level, explain their targets (including for net zero) and provide adequate disclosure. We strongly recommend all our signatories engage companies in key sectors on climate risk and emissions reduction and vote on climate resolutions in the 2020 Annual General Meeting season.
Innovative finance is essential
COP provides an opportunity for investors to consider how they can innovate in developing solutions to climate issues and in financing sector transition. The EU Taxonomy final report will offer signposting on how to get to net zero by 2050, highlighting the economic activities important to this and the main performance thresholds. In addition, the Inevitable Policy Response programme will provide an investor briefing paper on nature-based solutions, with a special focus on forest finance, available by April.
Ultimately, government action is essential. We are already at 1 degree Celsius and still need to cut emissions by 50 percent over the next decade. Investors want to see governments raise ambition toward net zero and deliver the Paris Agreement. Developed countries need to demonstrate their leadership and co-operation with China will be vital to unlock ambition by governments around the world.
I look forward to working with all our global signatories and stakeholders as well as the COP presidency to make this the finance COP.
We need to work together to go further faster together.
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.
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