A wrap up of PRI in Person 2022 - Barcelona (2024)

In five minutes I like to wrap up some heartwarming, relevant and insightful take aways from PRI in Person 2022. If you visited PRI in Person as well, let me know what you take home. Disclaimer: I was able to join only a few of all the (parallel) sessions and there were a lot of great stories I have to leave out to keep it rather compact. Without further ado:

We

Climate change

In the most optimistic scenarios we’re going to 1.7C temperature rise if all promised actions are kept. The reality will be warmer and be far more devastating, as we’re now on the 2.6C pathway. This should not scare us away, but push harder to get this fixed.

As Fatih Birol from International Energy Agency said basically that the golden age of gas has come to an end and renewables are often cheaper and provide more energy security from a political angle.

Frans Timmermans, EU Commission, indicated that over 500 EU financial institutions made net zero pledges already. Emerging economies contributed the least to climate change but are hit hardest. We should of course invest massively in climate solutions, which can be high tech, but as Wendy Cromwell (PRI) rightly said, ‘the best climate technology we have is a tree’ and ‘Blue Hydrogen’ is a very misleading concept that will not help us, according to Sue Reid (Global Optimism). Blue Hydrogen is hydrogen made with fossil fuels combined with carbon capture and storage.

SEC and ESG disclosure

The SEC comes with additional requirements for companies to be transparent on climate impact. This will be disputed but will be reality with some delays.

Circular Economy

Personally, one of the great things of the energy transition to renewables is that we can stop mining or drilling for fossil fuels and burn them but build technology that lasts. But for building that technology, we need a lot of material. This should not be an discouragement not to make the transition but to conduct due diligence. If you are a Dutchie, see more during this one hour webinar I did on behalf of the The IRBC Agreement Insurance Companies (€900bln), .

Therefore, I was glad to listen to a great session on the core problem that our economy is linear (make-use-discard) instead of a circular one. With a finite amount of material, we cannot sustain a linear economy in the most literal way.

Steven Stove (UN Environmental Program) indicated we only recycle ten percent in OECD-countries. It is crucial that we keep materials flowing longer, as long as we can. I learned that there are many groups worldwide working towards circular economies, so I’m going to check out the African Circular Economy Alliance (https://www.aceaafrica.org ) and the Circular Economy Coalition Latin America and Caribbean (https://coalicioneconomiacircular.org/en/home/).

Deanna Zhang (Circularity Capital) made a very important differentiation between the inner and outer loop. I.e. a cellphone that get refurbished (inner loop) remains about 40% of the original value, while recycled (outer loop) it is below half a percent. We need to focus on use products longer as a first priority. We should tax the use of raw materials more.

Sylvia Van Waveren (Robeco) said rightfully, we have the best jobs of the world. We can let money talk by our investments and engagements. Personally I’d like to add voting as well, and I know Robeco does that as well. One of the things Sylvia engages on with plastic companies is that they shouldn’t lobby against strict regulation that pushes for less and better recycled products. This are the types of engagements that are labor intensive but are in my view very valuable. You cannot expect that companies are functioning great while not be willing to contribute to it from a governance perspective.

Human Rights collective engagement initiative

I’m excited to learn more about Advance, a large collaborative engagement initiative focusing on human rights (https://www.unpri.org/investment-tools/stewardship/advance ), presented by Bettina Reinboth (PRI). It will focus on remedy as well and will be a channel to communicate with right holders. Launching partners are Robeco, Pensioenfonds Detailhandel, OECD, Shift, UN Global Compact, Coalition on Workers Capital (CWC), Unicef and over 200 investors more (AuM $30trn). You may want to consider joining this promising initiative!

License to operate and affecting the company’s performance on the long run are mentioned as arguments why we should do this. However, while I am not worried about performance, based on tons of research on ESG and performance which show that ESG does not hamper results, on the contrary. The first argument is human rights itself to me.

Due diligence is in ESG for many a rather complex concept. The links towards the guidance give more grip on this. However it starts with stakeholders. As Jamie Lowe (Australian Heritage Council) said: ‘start with an open and genuine conversation with first nation persons’.

Mining

The Mining 2030 project (https://mining2030.org/) was showcased and due to the switch to renewables this becomes more relevant than ever. So I encourage you to take a look at least. For me this was a trip down memory lane because my first engagement was with a mining company that made use of the riverine tailings method.

Human Rights data

A report of PRI in collaboration with Shift was launched on human rights was launched. It offers tools how to integrate human rights in your investment due diligence. Data is already available for over thousand companies. See: https://www.unpri.org/human-rights/what-data-do-investors-need-to-manage-human-rights-risks/10856.article. Mark Hodge , Shift ‘some companies who go through severe human rights problems become leaders later, because they learned from it’. Saskia Kort-Chick (AllianceBernstein), ‘Keep in mind that numbers should go op at the beginning, before it can come down. It starts by creating an oversight.’

Collaborative engagement

Engagement is something close to my heart so I absolutely enjoyed the Friday morning session on this. Matt Crossman (Rathbones Group) came up with a great shopping list on collaborative engagement. Six questions you have to be able to answer to make the engagement a success and I couldn’t agree more.

!) Why does the group exist?

2) What do we do?

3) How do we behave? – kind questions or an open letter

4) What is success for us?

5) What is most important right now?

6) Who must do what?

From my experience, it’s often difficult to boil it down to two or three engagement asks, when defining success. especially because you see so many issues at a company. For me, it helps to ask what are enabling rights. Freedom of union can be an enabler because people can stand up for their rights, such as a living wage. While there is no guarantee, if you have to pick your battles it can be wise to focus on something that enables. Climate change is a major driver for biodiversity loss, so focusing on the first can at least help you with the second issue. The last question can make life so much easier, especially when you’re in an engagement group with NGOs and other non-investors: different skills and possibilities. At the IRBC Agreement Pension funds we did six engagement cases, and we put in quite some effort in these questions. The first ‘lessons learned’ are published (https://www.imvoconvenanten.nl/en/pension-funds/convenant/publications) and stay tuned for more soon.

The path ahead

The question it all starts with is purpose. Finance should serve the real economy which is there to serve people. This requires good public policies and functioning markets, which take the long run (more) into perspective. The things we don’t count, will not be accounted for, such as ecosystem services. There is a clear need to take these into account (one of the reasons I'm a big fan of Platform Biodiversity Accounting Financials https://pbafglobal.com/ and it's sister on carbon https://carbonaccountingfinancials.com/.

Classic ESG, taking factors into account that are financially material for the asset owner was a good start. But the primary question for the next period is what is the impact we have on the world financially and non-financially and taking responsibility for the negative externalities.

People, after all

Personally, I am still excited of all the great, inspiring and fun people I met the last days. To mention a few: The reunion of the ESG team of Pension fund Rail & OV (). Rik Teeuwen who cheerfully connects people and encourages collaboration within PRI, great to finally meet you in person, and a big thank you to you and the PRI-team! Lisa Hayles (Trillium Investments) and I met again. We connected at a PRI event about fifteen years ago and now we’re working together on something I’m rather excited about (to be continued). And many, many more that inspired me. I’m tired and energized at the same time. Thank you all. :-).

Disclaimer: I tried to give a short overview and still put (sometimes a bit shortened) key messages in the right context. For all the speakers: let me know if you see some errors.