Transcript by Kensho.

Lindsey Hall: I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: If you've been listening to our last several episodes of the podcast, we're just back from a busy Climate Week in New York City. We brought you several interviews from the sidelines of the week's events, and we'll be bringing on more of our coverage and takeaways in future episodes.

One challenge of covering Climate Week is that there's just so much going on. There are hundreds of events across the city, and Climate Week takes place alongside the UN General Assembly meeting. So we have thousands of people from around the world coming together to focus on the path forward for climate action. And that leaves us with a challenge: how do you sum all that up in a podcast episode?

Lindsey Hall: Well, to help us get our arms around it for today's episode, we're speaking to one person who has a pretty unique perspective. And that's David Atkin, the CEO of Principles for Responsible Investment, or PRI. This is an industry association of investors around the globe who've signed up to the PRI's 6 principles, which focus on incorporating ESG issues into investment practice. The organization has more than 5,000 signatories, representing more than $120 trillion in assets under management. 

S&P Global Sustainable1 hosted an event during Climate Week, and I emceed it, and David was one of the speakers there. So I was eager to follow up and get his perspective on the week. We also wanted to talk to David because in just a couple of days, his organization is hosting its big annual event. That's the PRI in Person conference, and it takes place in Tokyo October 3 through 5. This is another important event for sustainability stakeholders that can help us understand the direction of travel on the road to COP28, the UN's big climate conference in Dubai later this year.

Okay. Let's turn to my interview now with David where he starts by setting the scene for the week's events.

David Atkin: So New York Climate Week is separate from the General Assembly, UN General Assembly or the government of Dubai meet and discuss a range of issues. New York Climate Week is specifically focused and separately organized around issues that deal with climate. However, there is obviously a lot of overlap in the agendas, and there's lots of side events that you get access to even from the UN or governments and so forth.

The UNGC is the UN Global Compact. That is an initiative that's been going for more than 20 years now, and it's for corporates who work together in the Global Compact around issues of sustainability, human rights, climate environment. And the PRI has reciprocal rights on the Global Compact Board. They're on our Board. We're on their Board. And so the UNGC is one of the UN entities that supports the work of the UN more generally.

Lindsey Hall: Next, I asked David about his key takeaways, and you'll hear him mention a couple of different things. One, as Climate Week kicked off, The Taskforce on Nature-related Financial Disclosures (TNFD) published its final recommendations to guide companies in disclosing their dependencies and impacts on nature. And that followed a 2-year consultation.

The TNFD's recommendations cover topics like management's role in assessing nature-related risks, the material effects of nature on a company's strategy and how a firm can identify nature-related risks and opportunities in its business.

The second thing you'll hear from David is news from the U.S. Treasury. U.S. Treasury Secretary, Janet Yellen, announced a set of voluntary principles for net-zero financing and investment for financial institutions. Speaking during Climate Week, she said that principles encourage institutions to include clear practices, targets and metrics in their net-zero transition plan. She also called on institutions to "support their clients and portfolio companies and adopting their own transition plans." 

So here's David's reply when I asked him what was the most important development out of Climate Week for PRI members.

David Atkin: You know what, I find this is hard to split between the launch of the TNFD and Secretary Yellen's announcement about the Treasury's net-zero principles. 

We've been waiting for Treasury to indicate to the market its expectations of the need to transition to a net-zero economy. And so the fact that they've now done that, I think, sends a really important signal to the marketplace about expectations that everybody is going to have to go down this path. Every corporate investor is going to need to have their own climate transition plan.

And increasingly, those will become mandatory. And therefore, that means that, say, targets, identifying the programs that will enable you to reach those targets, how you're going to disclose to the marketplace that you are on target or not, these are all really important pieces of the architecture, I think, that's required to enable us to decarbonize our economies.

But the TNFD is really important because you can't solve the climate issue unless you're also ensuring that we are protecting the world that we live in and the depletion of our nature assets is accelerating. And we will reach a tipping point where nature will not be able to provide the resources to us to live or to have the tools in place to respond to climate. So a lot of the strategies that deal with climate are based on the natural assets of the planet. And so if you deplete those, you're depleting your ability to do the transition.

So I think those 2 things are really important because now TNFD is setting the right map for investors around how to create the datasets that enables you to make investable decisions around nature.

Lindsey Hall: I also asked David if he viewed the week as a success. And as you'll hear, his answer has some nuance.

David Atkin: I think the key thing that came out was that while positive steps are being taken, we are not moving fast enough, we're not making the transition fast enough. And so the fact that you've got these key players identifying the same things and recognizing that we're not where we need to be, I think, gives us further impetus to take more action, to take more steps and to be prepared, to be more ambitious, notwithstanding recognizing that there are lots of reasons why this is hard, but we really don't have a choice.

Investors don't have a choice. Corporates don't have a choice. Governments don't have a choice. Communities don't have a choice. We've got to go down this pathway.

So the key thing that came out of this week, I think, which will flow through, I hope, into COP28 is this sense of urgency. And we need to take the necessary steps. And yes, a lot of that is you've got to get the sequencing right, but we've got to get the sequencing moving faster.

Lindsey Hall: So you've just mentioned COP28. And even before that, there's another big climate event on the horizon. You have your annual PRI in Person conference next week in Tokyo.

David Atkin: That's correct.

Lindsey Hall: For listeners who aren't familiar with the event, what should they know about it and the themes you'll be covering there?

David Atkin: Yes. So look, the PRI in Person, which is what we describe it as, is one of the largest responsible investment conferences that's undertaking every year. We've been doing this, I think, since 2008, 2009, something like that. And each year, it gets bigger and better. And we'll have 1,300 delegates in Tokyo. We know that the Japanese government are invested in the success of the conference. They're wanting to showcase to the world how Japan is taking its place in the sustainability issues that I have been talking about.

And the conference is a place where investors come and learn. We demonstrate good practice, case studies, actions that they can take. And this year's theme is all about taking action. And so we'll be giving them practical examples of how investors can do that. But what's really pleasing is that it's an opportunity to showcase what's happening in Japan as well as the rest of the Southeast Asian region, which, frankly, is where much of the globe lives, 50% or more of the world's population lives.

And again, if we're going to address these sustainability issues, it's in those marketplaces that we're going to need to find solutions. And the investment community has got a very important role to play over there.

Lindsey Hall: One of the speakers during the S&P event that I mentioned had a quote, "There's no net zero without Asia." How would you respond to that idea?

David Atkin: 100% agree. So we know that you've got developed economies, you've got developing economies. One of the things that I'd say is very pleasing is that you're seeing regulators create the foundational work, which is enabling investors to step into. And it's a really positive from a directional point of view signaling being set by -- whether it's in Japan, in China, Hong Kong, Malaysia, Philippines, Thailand, Vietnam, there's a lot of really positive signaling from regulators about their expectations of investors.

And I think that's in part because those regulators understand that their communities will thrive if we address these sustainability issues and will suffer greatly if we see an inability to respond to climate change. So it's in their interests, and they're creating the groundwork for investors to play their role, their part in meeting those needs.

Lindsey Hall: Okay. I was looking at the agenda for this year's PRI in Person, and the first plenary session I saw on the agenda is on the topic of a just economic transition. Can you talk to me about why this topic is front and center?

David Atkin: Yes, absolutely. So I mean everything is connected to everything. I mean I sort of connected nature to climate. But I mean the truth of it is, unless you can bring your communities along -- and we're seeing this already, we're seeing that when we're talking about the economic transition to climate change, you have winners and losers. And you're seeing those communities, the part of the economy that were fossil fuel-based, fearing that their livelihoods are going to suffer greatly.

So it's really important that when governments working with investors and companies, think about not just moving on to renewable energy and thinking about what the solutions are from a, I guess, technology point of view, but that we're also spending the time ensuring that our communities affected also being supported in that change presence.

And so a just economic transition is making sure that you do that also to making sure that it's not just -- frankly, the developing worlds are not the economies that created the carbon problem. It's developed economies in Western Europe and the U.S. and where I come, from Australia, for example, which are the high emitters that have created the problem, and yet a lot of the cost is going to be borne by communities in developing countries.

If you go back to Asia, for example, Bangladesh as an example where very prone to flooding -- Indonesia. And so again, the economic transition has got to recognize that. And it has to be, I think, a recognition that developed economies need to support, provide the infrastructure in place in those developing economies if we're going to get out of this problem that we have.

Lindsey Hall: We expect to see a lot of emphasis on exactly this topic at COP28. During Climate Week, I heard you say that there is this theoretical recognition that to solve climate issues, you need to move capital from the Global North to the South, but you also highlighted some of the challenges in investing when it comes to actually getting that financing flowing to the Global South. Can you tell our listeners a little more about that?

David Atkin: So the truth of it is, which I think I said on the panel, was that theoretically, we know what we need to do. The problem is how do we create the right investment solutions that institutional capital can get behind. There's a lot of risk in investing in developing -- if you're an institutional investor in a developed market, say, for example, a pension fund, you've got obligations to achieve certain returns above inflation for your beneficiaries. So you can't just do the right thing. Aad from a moral point of view, if it doesn't -- so tick the financial boxes on a risk-adjusted basis, you can say, yes, with confidence, investing money in those new opportunities in developing markets is going to create the returns, and I'll take the appropriate amount of risk.

At the moment, first of all, it's not a pipeline of projects at a country level and at a sectorial level. We need to see what's the transport plan for x country, what's the agricultural plan and how does that then break down into specific projects that investors can then assess and understand the risks.

So I think that's the primary thing that needs to happen, but there also needs to be some more risk sharing, I think, or create the basis for institutional capital to go in there. But I think these are the next challenges for us, and we all need to be working on together.

Lindsey Hall: Okay. And those solutions for those things that you just said need to happen. Who does that sit with? What stakeholders' own responsibility for that?

David Atkin: I think the public sector and the private sector need to work together, but you need to have companies who've got R&D budgets that are creating technology innovation that investors can get behind and provide the capital, but that can only happen at a scale if public sector comes to the party and provides the right policy settings, but also creating the right project pipeline.

Lindsey Hall: So as we heard, there were some important developments for the investment community out of Climate Week. We heard David talk about the important signal the U.S. Treasury's net-zero guidance sends to financial institutions. And also, we heard him talk about the significance of the launch of The Taskforce on Nature-related Financial Disclosures, the TNFD. And that idea that you can't address climate in a separate silo from nature, that it's all interrelated, that's something that came up repeatedly in conversations across Climate Week, definitely one of the big takeaways for me.

Another one in sort of similar vein is this idea that any approach to addressing climate change in the energy transition can't ignore the role of communities. So the importance of a just economic transition was another big theme out of Climate Week.

Esther Whieldon: We also heard David talk about this other idea that came up a lot, the importance of collaborating across silos and the need to bring together the public and private sector to address climate change. And these are all ideas that are sure to continue playing out in the run-up to COP28. We'll be back next week with more coverage from Climate Week. So please stay tuned.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider, and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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