Heard at PRI in person
That’s a wrap for the PRI’s annual get together and what a week it has been. We all like to think our own events come close – but of course only one can truly claim to assemble the global ESG community around its hearth.
Responsible Investor‘s senior reporter Khalid Azizuddin was on the ground in Tokyo, and says this year will be a tough act to follow for Toronto 2024 – from a curtain-raiser concert by pop artist AY Young, to a Kabuki theatre and Queen medley, to having Japanese prime minister Fumio Kishida deliver the keynote address.
The side events were pretty impressive, too. One evening had seven separate drinks receptions; we take it the next morning’s panels were good, too, but will never know for sure.
It would be difficult to do justice to the gracious hospitality shown by PRI staff and the Japanese hosts in these brief dispatches.
For those who want to catch up on the panel discussions, they are available on demand from the PRI. For everything else, here is some fly-on-the-wall conference chatter – you could almost have been there yourself!
“California teachers live a very long time. We have 400 retirees over 100-years-old [audience gasps], and we are laser-focused on making sure we can pay out their benefits.”
CalSTRS board member Sharon Hendricks on integrating ESG factors in the midst of a US backlash
“If we start using direct air capture in power plants now, we can delay fossil fuel phase-out by a day, maybe two. It’s important to be clear about what technology actually can do.”
Martin Skancke, PRI chair
“We are in a brave new world – the boss of the Singapore central bank speaks like a green activist!”
Sean Kidney, CEO, Climate Bonds Initiative
“An unexpected benefit of the anti-ESG backlash is that it could help investors clarify how sustainability is aligned with their fiduciary duty.”
Hiroshi Shimizu, president, Nippon Life
“We are still talking about board diversity in Japan 20 to 30 years on from when we first started. Hang on, we are under Chatham House Rule right?”
A speaker thankful not to be named in a discussion on active stewardship in Japan
“We have big mouths but not the dollars to back it up.”
An Australian AM on the glacial pace of ESG policy and capital flows back home
“If my clients could see me here, yeah, they might ask some questions.”
A faith-based investor reflects on the lavish surroundings at a drinks reception
“I had to remove references to ESG from our marketing because our sales teams were just having doors shut in their faces. We started having reasonably useful conversations on an issue-by-issue basis once we replaced that with ‘sustainable investing’.”
An asset manager from a US Red state
“The difference is that the West sees the Just Transition as important because of climate change, while Asia sees climate change as important because of the Just Transition.”
An Asian investor on competing worldviews
Stranded assets should be renamed “capital destruction”.
Søren Larsen, Nykredit ESG head
PRI in Person in numbers: RI edition
No of attendees: 1,371
No of countries represented: >50
No of external side events: 37
No of concurrent break-out panels: 6
No of karaoke sessions: 2
No of hours without sleep: 37
No of key cards lost: 4
Would recommend?: 10/10
Quote of the week
“Investors need new ways of talking about the climate crisis. It’s not about ‘optimism’ or ‘pessimism’. It’s about science and action. I’m sick of being asked, ‘What gives you hope?’ I’d much rather be asked, ‘What are you doing?’”
It’s all about action for Brynn O’Brien, executive director of the Australasian Centre for Corporate Responsibility.
The week in RI
PRI in Person kicked off with a bang as Japan’s Prime minister Fumio Kishida used his keynote speech to outline a series of planned sustainable finance policy measures.
The PRI itself also officially launched its nature stewardship initiative Spring, and is asking investors to sign up as supporters.
Also on engagement, CA100+ chair François Humbert spoke to our features writer Paul Verney about greenwashing, “tactical empathy” and “engagement alpha”.
In Europe, Dutch financial watchdog AFM warned against the use of SFDR terms to promote investment products. Also on EU regulation, RI explored whether companies are ready for CSRD reporting and materiality assessments.
Finally, our reporter Dominic Webb did a Deep Dive into how UK pension trustees are grappling with ESG.
Blackrock drops racial equity audits?
Filers of a racial equity audit (REA) proposal at BlackRock were admittedly surprised when the US giant agreed in April 2021 to hire a third-party to assess its impacts on communities of colour – setting a precedent that made it harder for other managers to refuse to follow its lead.
There was also genuine positivity around the audit produced by BlackRock almost exactly two years later, especially given the quality of some other audits.
As part of its assessment, BlackRock highlighted its support for “racial equity assessments” proposals at other companies, noting its backing for eight out of 11 that went to the vote in the 2021 proxy season.
The first batch of REA proposals, mostly put to US financial heavyweights, were filed in the wake of the killings of George Floyd and Breonna Taylor, and amid growing awareness of the Black Lives Matter campaign.
Their success prompted a slew of filings in subsequent proxy seasons.
BlackRock revealed in its internal racial equity audit that in the 2022 proxy season it supported more but a lower proportion of audit proposals at investee firms than in 2021, backing 14 out of a potential 26.
This proxy season, however, BlackRock seems to have abandoned the idea. A recent analysis by US nonprofit Majority Action revealed that the manager did not support a single REA proposal among the 12 that went to the vote at S&P 500 companies in 2023.
Interestingly, many of the audit proposals that went to the vote this proxy season were filed at the same companies in 2022.
Asked about its voting, a spokesperson for BlackRock told RI that it “assesses each shareholder proposal on a case-by-case basis”. “We’re pleased to see companies improve their oversight and disclosures related to this topic over the past several years,” they added.
BlackRock’s justification for its broader collapse in support for environmental and social-focused shareholder proposals in 2023 has been on the grounds of a “continued” decline in quality, along with an increase in prescriptiveness.
But that rationale does not apply as simply here, since BlackRock has supported these requests in the past and even undertaken an audit itself.
Its hint at greater disclosure, too, also arguably misses the point. Racial equity audits are focused on assessing the impact on communities of colour, not how much a company says it does or discloses on the topic.
Even if there has been progress on the issue, has it been so profound that not one proposal warranted support this year? Perhaps that is a question that requires its own audit.
“If you if you start out with the wrong themes or the wrong approach, you’re on a hiding to nothing in terms of three years down the line showing that you’ve had a significant impact,” warned one European investor currently in the process of selecting their engagement priorities.
They admitted to RI that there had been a realisation at the fund that one of the big systemic issues they had focused on was not something they could make a dent in on a company-by-company basis, concluding that it was a matter for policymakers.
“We should have been engaging on other stuff”, they said, including things that might have brought a demonstrable return on engagement and improved the value of that company. “We are not activists,” they said.
They also expressed reservations about investors’ responses to climate change, in particular whether net-zero pledges might lead to pressure to divest.
“Yes, that does worry me, and it did make me sceptical about net-zero strategies when it was first mooted, that you might make investment decisions driven by your desire to achieve those targets rather than investment performance.”