PRI Conference 2023 – Key Insights

We recently visited Tokyo to attend the 2023 PRI conference, one of the biggest sustainable investing events globally. Held over three days with 1300 attendees gathering from around the world, the focus of the conference was ‘Moving from Commitment to Action’. We gained some very interesting insights and have highlighted some of the key takeaways below.

Policy support for sustainability is growing - Fumio Kishida, Prime Minister of Japan

Transition financing was a key area of focus with panellists largely in agreement that increased investment and policy support is needed to meet global sustainability targets. At the opening of the event, we heard from Japanese Prime Minister Fumio Kishida who talked through priority policy areas to support the energy transition and Japan’s decarbonisation targets. The most notable was the announcement of the world’s first government issued ‘climate transition bonds’ worth USD $130bn to support investment in renewable energy, green hydrogen, and transition related technology. This follows policies such as the US Inflation Reduction Act and EU Green Deal Industrial Plan which collectively are likely to drive more investment in companies supporting the energy transition and decarbonisation.

Climate and Nature are Interrelated

Biodiversity and nature featured heavily in conversations throughout the conference with recognition amongst speakers that biodiversity loss and climate change are intertwined and should be addressed in a coordinated way.

Also in focus were the business risks and opportunities presenting for sectors with a large exposure to and dependence on nature such as construction, agriculture, food and beverages, mining, and oil and gas. While most companies are still in the early stages of assessing their impact and dependency, they are recognising the materiality of their exposure and associated business risks that can surface such as disruption to supply chains, higher raw material costs, potential for regulatory compliance costs and reputational damage if not identified and managed effectively.

More transparency - Taskforce on Nature Related Financial Disclosures (TNFD)

Panellists emphasised their support for adoption of the recently published Taskforce on Nature Related Financial Disclosures (TNFD) – a set of recommended/voluntary disclosures designed to help organisations (and investors) understand and report on nature related risks and opportunities.

While it was recognised that frameworks like the TNFD will be a useful tool for companies and investors, it was also acknowledged that data needs improvement before it can be used effectively. As such, ASX companies are still in the very early stages of assessing and reporting on their nature related risks and opportunities with some companies (generally those in higher risk sectors) more progressed than others. There was discussion on the potential for nature related disclosures like the TNFD to become a mandatory reporting requirement which will likely prompt investors to gain a better understanding of which companies and sectors have the most impact nature and how risks are being managed.

Deforestation

Attention was also on deforestation given the impacts on biodiversity and climate. During the conference Professor Jim Skea, Chair IPCC noted the biggest portion of carbon dioxide removal at the moment is through avoided deforestation, and reforestation. We are seeing regulation on deforestation growing globally, particularly in the EU and UK while here in Australia a handful companies have started to set deforestation commitments.

We covered a lot of ground over the three days and gained some very interesting insights from responsible investment leaders around the world with many action items to consider back to Australia. One of those is to better understand (through our engagement efforts) where companies are at with identifying and reporting on nature related risks and opportunities and the impact on their business.

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