low carbon economy

A MATURING SECTOR – Reporting from the PRI in Person 2019, Paris

Author: Irene Mastelli, Director Advisory at Phenix Capital Group B.V.

PRI in Person, 10-12 September 2019, Paris, France

The sustainability and impact sector is becoming more mature, as exemplified by both content and participation at the three-day conference ‘PRI in Person’, organized by the Principles for Responsible Investments (PRI), which took place in Paris two weeks ago. Regarding the content, overall impressions are that the sessions are becoming more practical and hands-on from the point of view of participation, there is a strong sense that incorporating sustainability in portfolios is now more mainstream.

Content-wise, the PRI in Person is a true smorgasbord, offering sessions on anything from ESG integration, to impact investing, to the practicalities of engagement with investees, alongside the more usual calls to action from industry stalwarts. I attended themed sessions on climate disclosures engagement when investing in extractive sectors, and technologies for a low carbon future. Here are some of my take-aways, in no particular order of importance:

  • Sustainability is not some grand theme disconnected from reality; it affects people’s lives very directly. In a particularly emotional session discussing tailings of the mining industry (these are harmful byproducts of the extractive process), we heard from a survivor of the Brumadinho disaster in Brazil, which claimed many lives and had deep ramifications for the population, and ultimately the entire mining industry. After the events, investors acted to circulate and promote new and safer standards, and to collect and share information on the greatest tailing risks.

  • Related to this, disclosing more information – on for example one’s exposure to climate risks – is a painstaking but necessary step toward greater awareness of risks, and ultimately greater sustainability. This was discussed in a session about the Financial Stability Board Task Force on Climate-related Financial Disclosures (also known as TCFD), an initiative which is encountering a certain level of enthusiasm, with many more disclosing voluntarily than initially anticipated.

  • On the topic of the transition to a low carbon economy, whether it is renewable energy, producing and distributing power to avoid waste, better “informed” electricity grids, the technology already exists and is proven. In many places renewables are beating fossil fuels from an economic perspective, and we continue to hear that it is fossil fuels, and their parent industries, which continue to receive subsidies. My conclusion is that there are no excuses to not act, and investors’ role in financing low carbon solutions will be critical.

  • Carbon pricing, while no silver bullet, is an effective solution. According to Rick van der Ploeg of University of Oxford and VU Amsterdam, any price below $75 means – globally – a temperature rise beyond 2 degrees.

On participation it would be difficult to count the holdouts – those who have not yet signed on to the Principles- but it certainly feels as though the largest and most visible asset owners, particularly in developed markets, are PRI signatories, and eager to attend the conference and share their experiences. Moreover, in a traditionally competitive sector, sustainable investments seem to attract greater collaboration between all parties, which we welcome.