Managing director of PRI, Fiona Reynolds, has called on Australia’s super funds for more action on ESG implementation as part of the organisation’s bid to move from awareness to impact on ESG.
In Australia as the guest speaker at the Women in Super national roadshow, Reynolds says that asset owners can ask managers for more, including translating ESG requirements into mandate design and ongoing monitoring.
“Creating long-term value is harder than short-term results but it is what super funds should do. Most people do know what needs to be done to create a stable system, so why are there so few people focusing on these issues?” she asked.
PRI is focused on ensuring investors pay attention to non-financial issues, and Reynolds says PRI’s main goal is the creation of a sustainable global financial system.
“Our retirement security relies on it,” she says. “But we still have a system with conflicts of interest, that rewards opaque investments, has obscene salaries, has corporate profit shifting and tax avoidance, and rewards returns today not tomorrow.”
She says that as “owners” super funds need to understand the long term and short term strategies of the companies they invest in.
“Responsible investment is being a better investor, it is about performance not philanthropy. It is thinking about risk in a more holistic way, about risk management. It is not at odds with fiduciary duty. How can you meet fiduciary duty if you don’t consider risk?”
Reynolds outlined two major ESG priorities for PRI this year. The first is tax, or most specifically tax avoidance. And the second is climate change culminating with the Paris climate talks in December.
“Pension funds want to see a price on carbon. We need to act now,” she says.
With regard to climate change action, PRI is encouraging investors to focus on four areas:
- Show support to policy makers for global agreement in Paris
- Demonstrate they are addressing climate change
- Engage with investee companies
- Convene at key moments during 2015
Reynolds reminded the Sydney audience at the Women in Super lunch, that there are major demographic and structural changes affecting markets, economies and citizens.
“By 2050 there will be 10 billion people on the planet, and this is leading to overuse of resources leading to high emissions,” she says. At the same time there is growing social and income inequality, continued gender inequality and infrastructure issues.
“While many of the issues are environmental, social and governance issues, they are also economic and investment issues,” she says. “If you have a look at the World Economic Forum 2015 global risk report, it is the first year that economic concerns have outstripped economic considerations in risks that the world is facing. These include extreme weather, national catastrophes, water scarcity, and climate change. These will not fade away quickly.”