Five Takeaways from PRI in Person 2024

Last week, 1,700 delegates from business, government and civil society gathered at PRI in Person 2024 in Toronto to engage with pressing issues, share lessons learned and coordinate efforts on shared priorities. Discussions focused on systematic risks, including the accelerating impacts of climate change, biodiversity loss, geopolitical instability and economic inequality.

The highlight of the conference was an announcement of two sustainable finance policy initiatives by Deputy Prime Minister and Minister of Finance Chrystia Freeland. First, a sustainable investment taxonomy is forthcoming that will clearly label economic activities as ‘green’ or ‘transition’ to streamline capital flows to climate solutions, with guidelines expected within a year from an independent advisory body. Second, amendments to the Canadian Corporation Business Act will introduce mandatory climate reporting for federally regulated private companies, aligning with ongoing efforts by the Office of the Superintendent of Financial Institutions (OSFI) and the Canadian Sustainability Standards Board (CSSB) to require climate disclosures for large financial institutions. These initiatives will equip investors in Canadian companies and assets to make informed decisions in support of sustainable objectives.

Here are five takeaways from one of the largest responsible investing conferences:

1. From climate mitigation to climate solutions and adaptation

The imperative to rapidly reduce GHG emissions is the top issue for responsible investors. UN Special Envoy for Climate Action and Finance Mark Carney put a call out to delegates, saying “we need to ask ourselves individually and collectively whether we are doing enough… We are the first generation of investors who understand the risks, but also the last generation who can make a difference.”

Investor action on climate needs to accelerate and facilitate real world emissions reductions through investing in climate solutions, supporting companies to transition their operations and avoid financing the expansion of fossil fuels. As the impacts of climate change materialize, additional capital flows towards climate adaptation and resilience are imperative and typically provide strong returns on investment.

2. Investors need to add policy engagement to their stewardship toolbox

Investors need to leverage their influence to advocate for effective regulation that supports long-term policy certainty and incentivizes efficient capital allocation. Collaborating with like-minded investors to engage policymakers can be more effective than individual corporate engagements for addressing systematic risks that are difficult to tackle alone.

For newer ESG themes like biodiversity, inequality and ethical artificial intelligence, collaborative engagement initiatives are essential for building capacity and expertise. Investors also need to be proactive in reviewing the lobbying activities of their investee companies to ensure they are consistent with their broader strategic objectives.

3. Physical climate impacts already leading to major losses and will continue to erode value 

Climate change is already impacting communities and investor portfolios globally. During the conference, Hurricane Milton struck Florida, the second hurricane in two weeks, causing billions in damage across the state. As severe climate events continue to intensify and become more frequent, investors can no longer rely on historical data as guide for future outcomes when assessing and pricing risk. Software solutions do exist to support investors in assessing their direct physical climate risks, but indirect risks such as supply chain disruptions remain challenging to accurately price. Enhancing resilience, awareness and preparedness is something all asset managers should be. acting on.

4. Social issues are becoming recognized as a risk in the energy transition

Investors are increasingly focusing on the “S” in ESG due to growing geopolitical instability, armed conflict and climate disasters, contributing to rising inequality and human rights abuses, as well as a  breakdown in societal cohesion, which pose systematic risks to the market. To respond to these challenges, investors should incorporate Just Transition considerations into their climate transition plans, protect human rights and evaluate social risks and opportunities in their portfolios. The newly launched Taskforce on Inequality and Social-related Financial Disclosures (TISFD) is developing a framework for investors to evaluate, manage and report on social risks.

5. Evolving ESG regulations and reporting standards requires organization-wide upskilling 

The rapid evolution of ESG regulations and reporting standards, such as the EU’s Sustainable Finance Disclosure Regulation (SFDR) and International Financial Reporting Standards’ (IFRS) S1 and S2, are creating a skills gap that requires investment, legal, risk and compliance teams to get up to speed quickly. Empowering investment teams with advice, knowledge and tools for sustainable investing is crucial for fostering accountability for meaningful ESG integration. New ESG reporting regulations are impacting investors in several ways. Reporting must address the needs of diverse audiences, including regulators and consumers, with tailored content. Financially material ESG information will face heightened scrutiny and assurance requirements. Additionally, tighter timelines for integrating ESG with financial data demands better systems, controls and processes.

At Quinn+Partners, we advise businesses and investors to embrace sustainability and the climate transition and excel in a changing world. If you are ready to take the next step on your climate journey, please get in touch.