PRI in Person: David Atkin warns ‘net zero commitments should be backed by quantifiable action’

The global net zero investment community descended this week onto the Japanese capital of Tokyo, as the Principles for Responsible Investment (PRI), the UN-backed coalition that pushes for green standards in investment strategies, held its annual conference, PRI in Person.

During day one, Japanese Prime Minister Fumio Kishida urged investors to step up their climate allocations and one of the country's biggest asset owners, Nippon Life Insurance, said pension funds should not be afraid for more stringent regulation.

Day two was dominated by concerns about growing anti-ESG sentiments in the world's largest investment market, while the resignation of Alecta's chair and GIC divesting its Vista stake also kept delegates talking.

On the last day of the conference, which was attended by more than 1,300 climate finance insiders from all corners of the world this week, Net Zero Investor sits down with David Atkin, since December 2021 the PRI's chief executive officer. The London-based Australian reflects on the week that was.

Investors gathered here in Tokyo this week to discuss a range of responsible investment challenges. What should be the key takeaway from this event, in your view?

The theme of PRI in Person this year was moving from commitments to action. That is the number one takeaway for investors, policymakers and stakeholders across the responsible investment ecosystem. To achieve the goals of the Paris Agreement, action is imperative across the board. We are encouraged by the terrific momentum in sustainable investing, but we need to realise a whole-of-economy response to address the climate emergency.

So the message is that asset owners should put their money more where their mouth is. What is it that you expect?

For all investors, it’s essential that any commitments are backed by quantifiable action. For pension funds, beneficiaries are increasingly demanding this. I have seen tremendous advancement in how pension funds select, appoint and monitor asset managers to align investment and ownership decisions with net zero strategies, and anticipate even greater alignment in the future.

So next year more green capital allocations?

Yes, asset owners hold a unique position in the investment chain, in that they control – and can direct – huge pools of capital. By ensuring that this capital is invested in a way that is aligned with the goals of the Paris Agreement, and their own net zero strategies, asset owners play a critical role. With education and the right tools, investors can direct capital toward renewables and clean energy in a way that meets their risk-return profile. Growth in renewables and clean energy is essential to move away from dependencies on fossil fuels, and to achieve a just transition for workers and economies.

Earlier this week, the Japanese Prime Minister said investors could and should do more in order to meet net zero targets. Do you think investors are not committed enough, at the end of the day?

We have seen significant progress in commitment and action from asset owners via the UN-convened Net Zero Asset Owner Alliance, through which members commit to transition their investment portfolios to net-zero GHG emissions by 2050 – consistent with a maximum temperature rise of 1.5°C. 

The Alliance members were also the first in the finance sector to set intermediate targets. Ultimately the success of the Alliance, and other net zero initiatives, will be that their goals are achieved, and they are no longer needed. However, we have a lot of work to do before reaching that point.

Yes, everyone here in Tokyo agrees many obstacles and risks loom for investors. What are the biggest responsible investment challenges currently, in your view?

There are many challenges at the moment. But in particular that we have breached six of the nine planetary boundaries is worthwhile noting, and the fact we are only on 50% target for the sustainable development goals is also a concern. There is one thing I like delegates to go away with, that they have conviction. That they are on the right side of history.

Also read
PRI in Person: anti-ESG sentiments weigh heavily on investors’ minds

Also, the ecosystem investors are operating in is changing rapidly, however, as your own research team concluded recently.

Yes, through our Changing World consultation, we heard what signatories want from the PRI to support them in the responsible investment landscape as it stands today, and in the years ahead. Signatories want us to support their progression, to play a role in creating spaces for signatories to act, to influence system change and to engage effectively with markets at a regional level.

How did you respond to the results?

We created distinct but cross-functional teams. There is a strong appetite for PRI-supported communities of practice within regions, and a belief that the PRI and its signatories can create the right enabling environment for responsible investment through local engagement with policy, regulation and standard setting.

Then there is responsible investment solutions. Guidance, tools and training are seen as one of the most important PRI offerings, with a majority of signatories wanting more of these services to monitor and progress their responsible investment practices.

Also, our longer tenured signatories often look to the PRI for support on engagement and influencing norms. So here we will combine and strengthen our opportunities for investors to influence collectively, building reliable, repeatable services to support signatories’ collaborative action.

Finally, I understood this was your biggest conference-ever. Congratulations.

Responsible investment’s rapid growth is reflected in PRI signatory numbers, which were less than 2,000 just five years ago and are well over 5,000 today. This increase in signatories has in turn driven the growth and evolution of the PRI. Today it is a significantly more global and diverse organisation than ever before.

It has been a busy year.

The calendar year may be winding down, but the final quarter has seen the sustainable finance industry come to life. September saw the UN General Assembly, held alongside Climate Week in New York. This was followed closely by our own conference, here in Tokyo, which is then bookended by a final push on the climate front: COP28 in Dubai.

Some have criticised these events as mere talk shops with plentiful rhetoric but little follow-through. However, my recent experience in New York tells a different story. We found investors consistently driving progress on the urgent climate agenda. The various events highlighted a shift that’s finally occurring as we move from commitments into action – a theme we picked up in Tokyo this week!

Also read
PRI in Person: Alecta’s chair and GIC’s loss dominate conference conversations