The UN Principles for Responsible Investment (PRI) will require its entire book of 2,250 signatories – including asset owners, investment managers and service providers – to report how they have considered specific climate change risks in their portfolios from 2020.

The body, created by the United Nations to encourage investors to take a responsible and sustainable approach to managing assets, announced the tough new reporting measures for its members yesterday.

Fiona Reynolds, chief executive officer of the PRI, said: “It is increasingly important for investors to incorporate emerging mega-risks such as climate change into their view of the future.”

The PRI’s signatories together represent more than $83trn (€73trn) of assets.

The specific indicators of risk are those outlined by the Task Force on Climate-related Financial Disclosures (TCFD) and pertain to strategy and governance around climate change. The PRI said using them was high priority as they provided a global framework for translating information about climate into financial metrics.

It follows moves by several international bodies to formulate a way of measuring and monitoring how investors account for and consider climate change risks in their portfolios.

The European Union is in the process of creating a taxonomy that investors can use to demonstrate how they and their fund management providers rationalise such risks within their investments, along with other sustainable elements.

The TCFD was established by the globally recognised Financial Stability Board, led by Bank of England governor Mark Carney. Since 2018, the PRI has asked its members to consider the risk indicators that are aligned to its reporting framework on a voluntary basis.  

Fiona Reynolds, PRI

Fiona Reynolds, PRI

Reynolds at the PRI said: “TCFD provides the best available framework for systematically including climate-related risks and opportunities into investment strategy.”

Despite the current lack of obligation by the PRI, more than 480 investors representing $42trn opted to complete the indicators and submit responses. In 2019, the climate indicators will be voluntary but will become mandatory in 2020.

From then, signatories of the PRI will have the choice to keep their reports confidential to the UN body itself.

Further reading

A responsible investment wishlist for 2019
Leading investors and campaign groups – including Norges Bank, USS, APG, and the PRI – speak to IPE about what they want to see this year

Who’s doing what in ESG?
Susanna Rust explores the investor coalitions, campaign groups and organisations leading responsible investment efforts around the world