ESG interview – London CIV
London CIV is a prominent investor in infrastructure. How do you monitor ESG factors in those investments?
In my experience, incorporating ESG into infrastructure you need a sharp focus on good governance. Obviously, that is the absolute bare minimum for successful private operation of public interest assets in infrastructure investing programmes and, I would say, the starting point for robust responsible investment considera- tions with regards to environmental and socio-economic impacts. How infrastructure investors respond to environmental and social issues can also be indicators of leading practice. Infra- structure projects can have a direct impact on biodiversity and natural
resources
while the use of the local environment can potentially have significant effects on the energy transition. We invest in renew- ables as quite a large chunk of our infra- structure investments. We monitor all of this by having quarterly meetings with infrastructure fund man- agers, which are included in our quarterly investment reports, at a fund level, that we share with our clients. Typical questions we might ask during manager meetings will relate to the cor- porate governance of the manager and their sub-managers. We will then think about
the environmental and social
impact footprint and consider how well they are doing in terms of disclosure, transparency and stewardship. Are they engaging with the investee com- panies or with the infrastructure invest- ing programmes on a thorough basis? Are they generating improvements in the way those infrastructure assets are operated or managed? We have quite a detailed set of scoring criteria that we use to ask these questions on a quarterly basis. This happens in the investment mandate design and the due diligence that takes place before a manager is selected. Then it continues throughout the investment lifecycle, on a quarterly basis.
26 | portfolio institutional | February 2023 | Issue 120
As a fine artist who works in finance, it is pos- sible to say that I work cognitively differently to other members of the team.
As an artist, diversity and inclusion are issues that are close to your heart. What are you doing to address that in your role at London CIV? My boss bought me Freakonomics [by Ste- ven Levitt and Stephen J. Dubner] for Christmas. It has a great quote at the beginning that says: “Morality is how we think the world should work and econom- ics is how it actually works.” Ironically, I believe that equality and diversity is not just the right thing to do ethically, but there are also financial and socio-economic benefits to it. Some research I have been doing for a project has found that women’s equality, for example, will be achieved 136 years from now. Whilst our attention shifts to issues around war, energy security or cli- mate agreements, potentially the key to solving a lot of the world’s problems lies in the hands of those who think differently to the norm, and those who would make up a diverse business or boardroom. It is for that reason, issues around diversity and inclusion are close to my heart at London CIV and something that should be at the top of all investors’ prior- ity lists. We were one of the founding members of
the Asset Owner Diversity Charter and we have encouraged all our asset managers and other broader industry participants to sign up. I am working with Andreas Hoe- pner to develop COPy, which is going to be a conference on parity, where we hope to encourage businesses to sign up to net- zero targets on inequality to see if we can truly beat the abysmal 136-year forecast. As a fine artist who works in finance, it is possible to say that I work cognitively dif- ferently to other members of the team. In my personal experience, I have only ever found it helpful to have people from differ- ent professions, disciplines and back- grounds in order to solve key problems because none of us think in the same way. We have used a myriad of people work- ing with London CIV with different pro- fessions and backgrounds in terms of their academic practice and they come up with some great solutions to the prob- lems we face.
What will be the main engagement topics you will be focussing on this year? Coupled with our focus on climate change risk, we will prioritise interlinked themes such as biodiversity and reforestation. Human rights remain important to us as we continue to engage with companies accused of a range of activities, from ben- efiting from forced labour of Uyghurs to supporting human rights abuses in Pales- tine or providing arms to commit war crimes in Yemen or maintaining business relationships with military affiliated Mytel or Viettel in Myanmar. We have a lot on the agenda in terms of human rights so we have to take it one theme at a time. It can be quite a long pro- cess to understand where our exposure lies and to come up with a statement on our position with regards to each topic. Only after that can we start engaging with managers to understand how they will factor our concerns into their conversa- tions with investee companies.
The opinions expressed in this interview do not necessarily reflect those of London CIV.
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