investment knowledge but they are an engaged minority when it comes to ESG. For some schemes that can be up to 30%, so trustees are reacting to that. Segars: ESG is integrated into all that we do. We only have one investment fund, so it is not like we offer a separate green option. We have set a target to have 50% of the net-asset value of the fund in responsible assets by the end of this year. A target we have already surpassed. Smart: How do you define an ESG asset? Segars: We are defining them narrowly. We can go further and faster, but we do not want to greenwash or pay over the odds for greener assets coming onto the market. We have talked about the E, but it is also important to talk about the S and the G, because they can be at odds with each other. You might want to invest in an electric car company, but the materials for the batteries extracted from the ground may not be very E, while the way they treat the miners may not be very S. We need to think about ESG across the piece. Steward- ship is important here. Sheth: I hope such conversations can be more nuanced. Asking
if members are willing to give up return by going down a sus- tainable path was academic a couple of years ago. It is only over the last couple of years that we have been able to see what you might give up by not owning energy or defence stocks. Smart: The argument of giving up return to invest sustainably only relates to short-term returns, right? Sheth: It depends on what you consider short. It could be over a number of years.
The point is that unless you have strong beliefs – and that is hard as a master trust because they represent so many mem- bers – the pressure needs to be on fund managers to think about this in their assessments. Is this the right timing? Is this the right pricing?
It is much more of a nuanced conversation which has to be integrated into the portfolio manager’s job, so there is no phil- osophical difference. Then your core funds and core strategies are being managed with an eye to net zero, and the social and governance issues are also managed to the point where they have to deliver a financial outcome. That is a stock by stock, company by company, bond by bond assessment at different periods of time, which should not be
18 November 2022 portfolio institutional roundtable: Defined contribution
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