Bringing together sustainability-minded stakeholders

In Conversation with Jane Ambachtsheer

Daniel Morris; Hello and welcome to the BNP Paribas Asset Management in Conversation podcast. In this edition, we will bring you insights on sustainability and more specifically on the workings of the PRI, the advocacy network based around the principles for responsible investment that BNP Paribas Asset Management is a founding member of. I’m Daniel Morris, Chief Market Strategist, and I’m joined today by Jane Ambachtsheer. Jane, and thanks for joining me.

Jane Ambachtsheer: Hi, it’s a pleasure to be here.

DM: We are talking ahead of next month’s annual PRI In Person meeting. This is the world’s leading responsible investment conference where delegates, including policymakers and investment industry experts, hear about the latest development, discuss best practises and network. This year’s conference is in Sao Paulo in Brazil. It’s the PRI’s first visit to Latin America in over 10 years. First though, let’s have a look at the PRI for those who are new to the topic. What is the PRI and why was it created?

JA: The PRI is the most significant global investor network on responsible or sustainable investing. It was launched in 2006 with the support of the United Nations. And it brings together a range of key principles that investors sign on to. It’s interesting looking back at these six key principles which were created almost 20 years ago and see how relevant they still are today.

Let me go through them quickly. The first is about incorporating environmental, social and governance issues into investment analysis and decision-making. Second is to be active as [asset] owners and incorporate ESG issues into your ownership policies and practises, seek appropriate disclosure on ESG issues from the entities in which you invest, promote acceptance and implementation of the principles within the investment industry. If you’re working with managers, consultants, or others, make sure that they understand what the broad principles are and are generally aligned. Work together to enhance effectiveness in implementing the principles and then report on how you’re doing.

These voluntary principles were developed by an international group of investors. A fun fact is that I was working with Mercer Investment Consulting at the time and had the opportunity to work as a consultant in coordinating the development of the principles.

DM: A lot has changed over those 20 years. When you look back, what are some of the most impactful achievements that the PRI has helped to drive in the industry?

JA: First, if we think about the scale of the PRI, there are more than 5000 signatories representing more than $125 trillion in assets under management. That alone brings finance to the table to talk about some of the systemic issues facing the industry and create a network of investors that can coordinator and think about how to address some of these challenges.

As you say, a lot has changed: two steps forward, one step back. It’s a very dynamic time in the industry as we think about sustainability challenges facing the world and how the investment industry can tackle them. When we think about some concrete achievements or changes that the PRI has introduced, we’d be remiss to not focus on the reporting and assessment framework. This framework has been mandatory for PRI signatories since 2014. It’s evolved a lot. It’s sometimes criticised for complexity and being a heavy lift, particularly for asset owners and perhaps smaller managers. But it’s a pretty unique tool and database and it’s become a global benchmark for investors because it allows industry stakeholders to compare how asset owners or asset managers implemented, a variety of responsible investment practises. This is something that different stakeholders want to have a look at for lots of reasons. And the PRI is a really unique global database that makes it possible for people.

For example, investors and prospective clients or current clients will ask us at BNP Paribas Asset Management for our PRI ratings as part of their due diligence process or have a closer look at our assessment report in terms of what are we doing specifically on different elements of sustainability policy or governance strategy. So, it’s unique in terms of being able to have that apples to apples comparison. It also provides a repository of investor responses in terms of how commitments such as net zero commitments might be implemented.

DM: Jane, I know that the PRI is involved in coordinating engagement. Can you talk about what that entails?

JA: There are quite a few interesting examples on a range of topics from human rights to sovereign engagement. But let’s look at Climate Action 100 Plus, which is one of the world’s largest collaborative engagement initiatives, engaging something like 170 of the world’s biggest emitters that are responsible for the majority of global emissions coming from the listed corporate sector. PRI is one of the partners. A number of signatories work to encourage companies to reduce greenhouse gas emissions in a way that’s consistent with the goals of the Paris Agreement to measure how well companies are doing. Investors which have signed up to Climate Action 100 Plus engage with the respective companies and talk with them about how they can evolve.

When we think about the results of Climate Action 100 Plus, there are interesting new studies which have been looking at what that impact is and progress in the right direction. There is evidence that we’ve seen significant improvement in the number of companies which are making net zero  commitments, but not as much direct progress on decarbonisation. So, there’s no silver bullet.

But we can agree that by bringing together investors that are looking at topics that they believe are important for them in terms of how they’re allocating capital, how they’re looking to generate sustainable returns for their clients over the long term, we can increase efficiency and consistency by talking about strategic issues and using initiatives like Climate Action 100 Plus to allocate our resources efficiently.

DM: This year the annual PRI In Person conference is being held in Brazil. What is the significance of hosting it in this country and why now?

JA: Hosting the event in Brazil could be strategic for a few reasons. After Rio in 2015, this will be the second time that the PRI conference will be held in Latin America, which is a great opportunity to focus on the region, but also to talk more broadly about emerging markets. Brazil, of course, with the Amazon rainforest and the Cerrado within its borders, is critical in terms of tackling climate change and biodiversity loss. But the region as a whole is facing a number of environmental challenges, including deforestation. The timing is interesting because this is the last major sustainability-related event that’s happening before COP30, which will also be held in Brazil later in November.

Given this sequencing, the PRI has set the following few objectives. The first is support an enabling policy environment for responsible investment. The second is to demonstrate investor ambition on net zero nature and climate adaptation, including capital mobilisation to emerging and developing economies. And finally, to encourage responsible investment in Brazil and more broadly in Latin America.

So, we’re excited to participate in the event and believe that holding the PRI in Brazil should be a great opportunity to allow investors, policymakers and other stakeholders to work on these different points.

DM: Just before the COP30 event, what will be some of the key themes the conference will focus on this year?

JA: The focus is on global challenges, resilience strategies and investable opportunities. So, how do we tackle some of the systemic change that we need to address collectively as an industry and put more capital to work? It’s about the need for investors to have the strategies that address the current global challenges, but also to be able to figure out what are the opportunities in that context in the short, medium and long term.

Some of the specific topics the conference will focus on include climate action and the net zero transition, human rights and looking at the social impact and the Just Transition, biodiversity and natural capital strategies, the opportunities and challenges for emerging markets and sustainable development, And finally, looking at innovation in ESG data metrics and how we can use AI and evolving technologies to help tackle some of these challenges. So, we’re hopeful that clean progress can be made on all of these themes and looking forward to the event.

DM: Thank you very much, Jane.

A: Thanks for having me.

DM: That’s it for this episode of In Conversation. If you would like more information about sustainability-related investing, please reach out to your BNP Paribas Asset Management contact or check out our website for investment insights viewpoint. Just before we go, I’d like to mention that all our podcast episodes are available on Spotify and YouTube. For YouTube, visit youtube.com. You’ve been listening to the BNP Paribas Asset Management In Conversation podcast with me, Daniel Morris. and Jane Ambachir, Global head of sustainability. Until next time, take care.