Key takeaways from the UN PRI Conference

The United Nations Principles of Responsible Investing (UN PRI) Conference recently gathered global leaders to explore how financial investments can drive sustainable development and social equity. Here are some key themes and insights that stuck with me.

1. The Urgency of Sustainable Development Goals (SDGs)

Despite international efforts, the world is only on track to meet 17% of the UN’s Sustainable Development Goals (SDGs) by 2030. This statistic underscores a critical need for swift and decisive action to close this gap. The Montreal Protocol, which helped curb ozone depletion, serves as a reminder of what international cooperation can achieve—emphasizing the need for similar collective actions in other areas of environmental protection.

2. Transformative Potential of Collaboration

This year's PRI discussions highlighted the need for collective, collaborative, and forward-looking approaches to tackle complex sustainability challenges. A recurring idea was to "think three generations ahead," emphasizing a long-term perspective in strategy and planning. Noteworthy examples include the UK's closure of its last coal power plant and Norway's rapid shift to electric vehicles, which exemplify how policies and investments can promote rapid change.

3. Aligning Investments with Social Justice

The importance of a "just transition" toward a net-zero world emerged as a key theme. With new PRI research showing that social implications of net zero are significant, there is a growing awareness that the costs of transition often fall hardest on those least able to bear them. Sectors and communities dependent on high-carbon industries, like coal, face job losses and economic challenges, stressing the need for reskilling and job placement programs.

4. Policy and Incentive Structures for ESG

The PRI conference addressed the critical role of policy in advancing environmental, social, and governance (ESG) goals. Self-regulation alone is insufficient—government guardrails are necessary to ensure fair competition and maintain planetary boundaries. Examples, such as COP26’s imbalance in favor of lobbyists over nations, highlighted the need for transparency and ethical standards in lobbying.

5. ESG as an Alpha Factor in Investment

Investors are increasingly recognizing ESG as a source of potential alpha, or outperformance. However, successful ESG integration requires disaggregated data and understanding which factors directly impact company and sector performance. Governance remains critical, with region-specific focuses, such as Japan's priority on governance practices, showcasing ESG's varied global approaches. In recent years, the role of behavioral economics in ESG integration has become more prominent, as has engagement with portfolio companies to capture ESG-driven opportunities.

6. Responsible AI and Technology Investment

As we stand on the cusp of a technological revolution, the conference highlighted responsible technology investment, especially concerning AI. For companies, this means balancing productivity gains with equity concerns, such as labor impacts and data privacy. Boards and leadership need fluency in AI ethics and governance to make informed oversight decisions and set appropriate guardrails for responsible AI use.

7. Biodiversity and Nature as Core Investment Pillars

Approximately half of the global GDP is moderately or highly dependent on nature, highlighting the need to incorporate biodiversity into investment decision-making. The PRI underscored the balance between producing and protecting through regenerative practices, showcasing how investment strategies can connect natural science with portfolio management.

8. Education and Skills for a Sustainable Transition

A critical gap exists in ESG fluency among both investors and stakeholders. Bridging this gap through ESG training initiatives, such as Northern Trust’s ESG curriculum, can enhance understanding and accelerate integration. Workforce reskilling also plays a vital role in preparing for a sustainable economy, from environmental literacy to the technical skills required for green jobs.

Throughout the conference, it was abundantly clear that the journey to a sustainable and fair global economy demands ambitious action, targeted policies, and innovative investment strategies. The time is now. We must do more.?