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James Gifford, PRI: ‘we have made responsible investment normal’

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A decade after taking the reins of what is now the United Nations-supported Principles for Responsible Investment, James Gifford announced in August his intention to step aside. To mark his final week in the job, he spoke to Alex Blackburne about the last 10 years.

The date April 27 2006 is an historic one for New York City. Nearly five years after the September 11 terrorist attacks had brought down the twin towers of the World Trade Centre, construction began on the Freedom Tower – a monument to those killed in the atrocity.

We are going to soar to new heights and reclaim New York’s skyline”, then-governor George Pataki said at the time. Only last week, seven years after building work got underway, One World Trade Centre – as it is now known – was confirmed as the tallest building in the western hemisphere.

Just a short walk from the where bulldozers were heading on that day, Kofi Annan – then-secretary-general of the United Nations (UN) – was giving a speech. Joined by asset owners worth more than $2 trillion (£1.2 trillion), he was ringing the opening bell on the UN-supported Principles for Responsible Investment (PRI) at the New York Stock Exchange on Wall Street.

The beginning of construction work on One World Trade Centre rightly grabbed the headlines in New York City on that day. It was a symbol of the US’s defiance in the face of terrorism. But in the context of the long-term sustainability of the investment world – which shapes everything we do – Annan’s words to mark the launch of the PRI were equally historic.

While finance fuels the global economy, investment decision-making does not sufficiently reflect environmental, social and corporate governance considerations – or put another way, the tenets of sustainable development”, he told attendees.

Watching on from the wings on that day was James Gifford, an Australian who had spent three years developing the PRI from his role at the UN Environment Programme Finance Initiative (UNEP FI) in Geneva.

After a year-long consultation, involving Annan, UNEP FI and the UN Global Compact, six voluntary principles were drawn up, covering a range of environmental, social and governance (ESG) topics such as transparency, decision-making and active ownership. Asset managers were invited to become signatories, in a move that would help bolster their responsible investment credentials and the market more generally.

There is a lot more to do from our signatories and there is huge potential to deepen responsible investment, but I think what we have done is dramatically increased the size of the market, and the thinking around and importance of responsible investment”, says Gifford, reflecting over the past decade.

If you could encapsulate it within one concept, it is that we have made responsible investment normal. It’s becoming a norm. When the PRI was launched, I’d say it was right out on the edge. Fund managers who aren’t signatories – and this is from their own words – have said to me that they feel conspicuous by their absence. I think that alone is a huge achievement for this initiative.”

In the beginning, Gifford was the PRI’s only member of staff. It now has over 50, with partnership networks in nearly a dozen countries.

Thirty-two institutional asset owners with $2 trillion (£1.2 trillion) under management backed the PRI from launch, with its total signatories (including investment managers and professional service partners) nearing 100 by the end of April 2006. Just five days after Annan rang the bell on Wall Street, the European launch of PRI in Paris saw its assets double to $4 trillion (£2.5 trillion).

As of April 2013 – seven years after its launch in New York – the initiative boasts a total of 1,188 signatories, worth an estimated $34 trillion (£21.2 trillion).

Gifford is modest about the PRI’s growth and influence within the institutional investment world, adding that a large part of its success is down to the backing it continues to receive from the UN. Kofi Annan’s successor as UN secretary-general, Ban Ki-moon, has also strongly supported the initiative since taking on the role in 2007.

I think bringing the legitimacy and gravitas of the secretary-general and the United Nations into the investment space is a unique contribution”, he says from the PRI’s headquarters on Rivington Street in London.

There would have been other industry efforts and associations that would have done a lot of what we’re doing, but I think the fact that we are able to bring the UN to the table enabled us to reach out to a lot of people who would have otherwise not been as receptive.

Yes, absolutely others would have stepped up and done implementation, support, shareholder engagement, collaborations and a lot of the other things we do, but I think we’ve added a unique angle through bringing a UN investor partnership forward which has raised the profile to a level that I think would have been difficult for other industry efforts.”

In September this year, the PRI broke ground when it launched a framework that would compel its signatories to publish financial reports to the wider public. While a large percentage of them already did this – as well as publishing more in-depth detail about their investment strategies – many did not. In 2011, 44% of signatories reported publicly through the PRI, up from 40% in 2010 and 25% in 2009.

Gifford says the PRI’s aim is to have 100% of its signatories disclosing their reports to the public by mid-next year, in what should be considered a positive move towards greater transparency in responsible investment.

Despite leading the charge towards mandatory reporting and a potentially ground-breaking next few years for the PRI and the responsible investment world, Gifford revealed in August that he would be moving on to pastures new in November. He is reserved about his future, but vocal on where the PRI must go next.

Depth of implementation is the big challenge. That’s the big one. I think a lot of people now have policies in place a lot of people are now buying in research and a lot of people are joining collaborative shareholder engagements. The next big push has got to be the depth of that”, he says.

The analogy is the corporate sustainability movement and the transition over the last 15 years in corporate thinking about the importance of sustainability. I think it’s now board level. You have chief sustainability officers reporting directly to CEOs. They have the ear of boards. There is the whole embedding of sustainability into the company strategy, and I think we will see the same with investment.”

In terms of retail investment, Gifford adds his voice to those who say the market has moved on from its historical roots in negative screening. To create real change, he argues that investors should look for funds that own companies with what he calls “challenges” and that are using shareholder engagement to revolutionise from within.

The PRI has been successful within the institutional investment world, in demonstrating that integrating ESG factors into investment processes and ownership activities is core, mainstream activity, and it’s quite different from the traditional ethical investment movement. I think we’ve been successful in that.”

Ten years after Gifford and the UN Environment Programme Finance Initiative formulated the idea of a set of principles, and seven years after that concept became a reality, the PRI is in a strong position to lead a new wave of more sustainable and responsible investment. While Gifford won’t be a part of its future, his influence over the past decade is almost unrivalled in the industry.

He leaves his successor a powerful and engaged financial community with which to leverage positive change in the long-term. As Larry Silverstein, the owner of the twin towers who handed over control of One World Trade Centre to the Port Authority, said on the same day as the PRI launched, “This is an opportunity for us to show our determination, our resiliency, our resolve.”

James Gifford is executive director of the PRI and has been guiding the initiative since its inception in November 2003. He worked with UNEP FI and the UN Global Compact leading the PRI drafting process, and after the launch and the establishment of the secretariat in 2006, became its first executive director. He has a PhD from the Faculty of Economics and Business at the University of Sydney on the effectiveness of shareholder engagement in improving corporate environmental, social and corporate governance performance and is an honorary research fellow in the School of Management at the University of St Andrews. He has a background in IT and environmental protection. James has degrees in commerce and law from the University of Queensland, and a master’s of environment management from the University of New South Wales. He was named in 2010 by the World Economic Forum as one of 200 Young Global Leaders, and is stepping down from his PRI role in November 2013. 

Further reading:

Responsible investment is ‘an inevitable movement in society’

Encouraging sustainable finance: the Principles for Responsible Investment

The principles for responsible investment: a round-up

PRI signatories pick out top ESG engagement issues

The Guide to Sustainable Investment 2013

Editors Choice

2017 Was the Most Expensive Year Ever for U.S. Natural Disaster Damage

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Natural Disaster Damage
Shutterstock / By Droidworker | https://www.shutterstock.com/g/droidworker

Devastating natural disasters dominated last year’s headlines and made many wonder how the affected areas could ever recover. According to data from the U.S. National Oceanic and Atmospheric Administration (NOAA), the storms and other weather events that caused the destruction were extremely costly.

Specifically, the natural disasters recorded last year caused so much damage that the associated losses made 2017 the most expensive year on record in the 38-year history of keeping such data. The following are several reasons that 2017 made headlines for this notorious distinction.

Over a Dozen Events With Losses Totalling More Than $1 Billion Each

The NOAA reports that in total, the recorded losses equaled $306 billion, which is $90 billion more than the amount associated with 2005, the previous record holder. One of the primary reasons the dollar amount climbed so high last year is that 16 individual events cost more than $1 billion each.

Global Warming Contributed to Hurricane Harvey

Hurricane Harvey, one of two Category-4 hurricanes that made landfall in 2017, was a particularly expensive natural disaster. Nearly 800,000 people needed assistance after the storm. Hurricane Harvey alone cost $125 billion, with some estimates even higher than that. So far, the only hurricane more expensive than Harvey was Katrina.

Before Hurricane Harvey hit, scientists speculated climate change could make it worse. They discussed how rising ocean temperatures make hurricanes more intense, and warmer atmospheres have higher amounts of water vapor, causing larger rainfall totals.

Since then, a new study published in “Environmental Research Letters” confirmed climate change was indeed a factor that gave Hurricane Harvey more power. It found environmental conditions associated with global warming made the storm more severe and increase the likelihood of similar events.

That same study also compared today’s storms with ones from 1900. It found that compared to those earlier weather phenomena, Hurricane Harvey’s rainfall was 15 percent more intense and three times as likely to happen now versus in 1900.

Warming oceans are one of the contributing factors. Specifically, the ocean’s surface temperature associated with the region where Hurricane Harvey quickly transformed from a tropical storm into a Category 4 hurricane has become about 1 degree Fahrenheit warmer over the past few decades.

Michael Mann, a climatologist from Penn State University, believes that due to a relationship known as the Clausius-Clapeyron equation, there was about 3-5 percent more moisture in the air, which caused more rain. To complicate matters even more, global warming made sea levels rise by more than 6 inches in the Houston area over the past few decades. Mann also believes global warming caused the stationery summer weather patterns that made Hurricane Harvey stop moving and saturate the area with rain. Mann clarifies although global warming didn’t cause Hurricane Harvey as a whole, it exacerbated several factors of the storm.

Also, statistics collected by the Environmental Protection Agency (EPA) from 1901-2015 found the precipitation levels in the contiguous 48 states had gone up by 0.17 inches per decade. The EPA notes the increase is expected because rainfall totals tend to go up as the Earth’s surface temperatures rise and additional evaporation occurs.

The EPA’s measurements about surface temperature indicate for the same timespan mentioned above for precipitation, the temperatures have gotten 0.14 Fahrenheit hotter per decade. Also, although the global surface temperature went up by 0.15 Fahrenheit during the same period, the temperature rise has been faster in the United States compared to the rest of the world since the 1970s.

Severe Storms Cause a Loss of Productivity

Many people don’t immediately think of one important factor when discussing the aftermath of natural disasters: the adverse impact on productivity. Businesses and members of the workforce in Houston, Miami and other cities hit by Hurricanes Harvey and Irma suffered losses that may total between $150-200 billion when both damage and sacrificed productivity are accounted for, according to estimates from Moody’s Analytics.

Some workers who decide to leave their homes before storms arrive delay returning after the immediate danger has passed. As a result of their absences, a labor-force shortage may occur. News sources posted stories highlighting that the Houston area might not have enough construction workers to handle necessary rebuilding efforts after Hurricane Harvey.

It’s not hard to imagine the impact heavy storms could have on business operations. However, companies that offer goods to help people prepare for hurricanes and similar disasters often find the market wants what they provide. While watching the paths of current storms, people tend to recall storms that took place years ago and see them as reminders to get prepared for what could happen.

Longer and More Disastrous Wildfires Require More Resources to Fight

The wildfires that ripped through millions of acres in the western region of the United States this year also made substantial contributions to the 2017 disaster-related expenses. The U.S. Forest Service, which is within the U.S. Department of Agriculture, reported 2017 as its costliest year ever and saw total expenditures exceeding $2 billion.

The agency anticipates the costs will grow, especially when they take past data into account. In 1995, the U.S. Forest Service spent 16 percent of its annual budget for wildfire-fighting costs, but in 2015, the amount ballooned to 52 percent. The sheer number of wildfires last year didn’t help matters either. Between January 1 and November 24 last year, 54,858 fires broke out.

2017: Among the Three Hottest Years Recorded

People cause the majority of wildfires, but climate change acts as another notable contributor. In addition to affecting hurricane intensity, rising temperatures help fires spread and make them harder to extinguish.

Data collected by the National Interagency Fire Center and published by the EPA highlighted a correlation between the largest wildfires and the warmest years on record. The extent of damage caused by wildfires has gotten worse since the 1980s, but became particularly severe starting in 2000 during a period characterized by some of the warmest years the U.S. ever recorded.

Things haven’t changed for the better, either. In mid-December of 2017, the World Meteorological Organization released a statement announcing the year would likely end as one of the three warmest years ever recorded. A notable finding since the group looks at global land and ocean temperature, not just statistics associated with the United States.

Not all the most financially impactful weather events in 2017 were hurricanes and wildfires. Some of the other issues that cost over $1 billion included a hailstorm in Colorado, tornados in several regions of the U.S. and substantial flooding throughout Missouri and Arkansas.

Although numerous factors gave these natural disasters momentum, scientists know climate change was a defining force — a reality that should worry just about everyone.

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Environment

How to be More eco-Responsible in 2018

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eco-responsible
Shutterstock / By KENG MERRY Paper Art | https://www.shutterstock.com/g/kengmerrymikeymelody

Nowadays, more and more people are talking about being more eco-responsible. There is a constant growth of information regarding the importance of being aware of ecological issues and the methods of using eco-friendly necessities on daily basis.

Have you been considering becoming more eco-responsible after the New Year? If so, here are some useful tips that could help you make the difference in the following year:

1. Energy – produce it, save it

If you’re building a house or planning to expand your living space, think before deciding on the final square footage. Maybe you don’t really need that much space. Unnecessary square footage will force you to spend more building materials, but it will also result in having to use extra heating, air-conditioning, and electricity in it.

It’s even better if you seek professional help to reduce energy consumption. An energy audit can provide you some great piece of advice on how to save on your energy bills.

While buying appliances such as a refrigerator or a dishwasher, make sure they have “Energy Star” label on, as it means they are energy-efficient.

energy efficient

Shutterstock Licensed Photo – By My Life Graphic

Regarding the production of energy, you can power your home with renewable energy. The most common way is to install rooftop solar panels. They can be used for producing electricity, as well as heat for the house. If powering the whole home is a big step for you, try with solar oven then – they trap the sunlight in order to heat food! Solar air conditioning is another interesting thing to try out – instead of providing you with heat, it cools your house!

2. Don’t be just another tourist

Think about the environment, as well your own enjoyment – try not to travel too far, as most forms of transport contribute to the climate change. Choose the most environmentally friendly means of transport that you can, as well as environmentally friendly accommodation. If you can go to a destination that is being recommended as an eco-travel destination – even better! Interesting countries such as Zambia, Vietnam or Nicaragua are among these destinations that are famous for its sustainability efforts.

3. Let your beauty be also eco-friendly

eco-friendly

Shutterstock / By Khakimullin Aleksandr

We all want to look beautiful. Unfortunately, sometimes (or very often) it comes with a price. Cruelty-free cosmetics are making its way on the world market but be careful with the labels – just because it says a product hasn’t been tested on animals, it doesn’t  mean that some of the product’s ingredients haven’t been tested on some poor animal.

To be sure which companies definitely stay away from the cruel testing on animals, check PETA Bunny list of cosmetic companies just to make sure which ones are truly and completely cruelty-free.

It’s also important if a brand uses toxic ingredients. Brands such as Tata Harper Skincare or Dr Bronner’s use only organic ingredients and biodegradable packaging, as well as being cruelty-free. Of course, this list is longer, so you’ll have to do some online research.

4. Know thy recycling

People often make mistakes while wanting to do something good for the environment. For example, plastic grocery bags, take-out containers, paper coffee cups and shredded paper cannot be recycled in your curb for many reasons, so don’t throw them into recycling bins. The same applies to pizza boxes, household glass, ceramics, and pottery – whether they are contaminated by grease or difficult to recycle, they just can’t go through the usual recycling process.

People usually forget to do is to rinse plastic and metal containers – they always have some residue, so be thorough. Also, bottle caps are allowed, too, so don’t separate them from the bottles. However, yard waste isn’t recyclable, so any yard waste or junk you are unsure of – just contact rubbish removal services instead of piling it up in public containers or in your own yard.

5. Fashion can be both eco-friendly and cool

Believe it or not, there are actually places where you can buy clothes that are eco-friendly, sustainable, as well as ethical. And they look cool, too! Companies like Everlane are very transparent about where their clothes are manufactured and how the price is set. PACT is another great company that uses non-GMO, organic cotton and non-toxic dyes for their clothing, while simultaneously using renewable energy factories. Soko is a company that uses natural and recycled materials in making their clothes and jewelry.

All in all

The truth is – being eco-responsible can be done in many ways. There are tons of small things we could change when it comes to our habits that would make a positive influence on the environment. The point is to start doing research on things that can be done by every person and it can start with the only thing that person has the control of – their own household.

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