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The annual “PRI in Person” conference on the Principles of Responsible Investment took place last September 8, in Paris. This three-day event brought together more than 1,800 people on the topic of responsible finance.
Concerning the importance of the event, it can be considered the world summit on sustainable and responsible investment. In fact, the PRI represent more than 2,300 signatories, which is an impressive number of both participants and assets under management. It is also important to underscore the great diversity of nationalities present. Moreover, the summit was attended by high-level world decision-makers in finance as well as regulatory executives such as the Chairman of the European Investment Bank, the French Minister of the Economy or the representatives of large international pension funds such as ABP, PGGM, AP-fondsen (Sweden) or the Japanese government pension fund.
The inevitable political response
What lessons can be drawn from this? Within the community, there is consensus on the question of the energy transition and the essential role of private investors. It is now time to take things to the next level. The speed with which these private investors will play their role in confronting the climate emergency is crucial, which further emphasises the importance of the conference title “In an age of urgent transition”. The awareness of climate challenges continues to deepen and the current momentum increases the likelihood of the adoption of more ambitious and demanding policies. In the absence of alternatives and in view of the importance of sectors such as agriculture or biodiversity, we can expect stronger climate-related regulations in the near future.
#InevitablePolicyResponse was one of the main hashtags of these three days. The SEC first mentioned it for American companies, then the European Commission repeated it. The European Investment Bank subsequently relied on this hashtag to confirm the need to redirect financing toward sustainable investments. It also underscored the danger for investors of getting stuck with unsellable investments, i.e. stranded assets.
This “inevitable political response” should lead to changes in current regulations, moving from the question “what opportunity does the real economy represent for you?” to the question “what do you represent for the real economy?”. This paradigm shift should strengthen the question of the real impact of responsible finance. There is the risk of overpromise concerning sustainable and responsible strategies without tangible proof of their positive contributions to the real economy.
One of the main subjects of the “impact and reconnection with the real economy” conference underscores the challenge of the notions of intentionality and impact measurement. The discussions quickly concluded, nearly unanimously, on the complexity of the subjects, in particular due the lack of data for measuring them accurately. Sustainable development objectives are often evoked as a frame of reference for estimating the sustainable impact of responsible investments. However, here again prudence is necessary in the interpretation of sustainable development objectives and the direct link between a company’s core business and a particular sustainable development objective (SDO). We should avoid creating a negative dynamic, such as greenwashing or SDG’s washing by wanting to go too fast.
In conclusion, believing that responsible investment is a momentary trend could turn out to be a business mistake. The trend is structural. It is here to stay and grows in significance with the support of regulatory and supervisory authorities.
Believing that it is a new sales technique or customer approach could also turn out to be wishful thinking. The requirements applicable to sustainable and responsible investing are in fact increasing day by day.
Finally, as exemplified by the tenacity of the speakers at the “PRI in Person” summit, the movement and commitment have substantially expanded in recent years. They have become a powerful lobbying machine with the main investment authorities willing to create meaningful change. In a hashtag: #Inevitableoption !