ESG interview – Railpen INTERVIEW – CHANDRA GOPINATHAN
“What we do today should not compromise tomorrow’s outcomes.”
Railpen’s senior investment manager of sustainable ownership tells Andrew Holt about what responsible investing means to the scheme and how he is helping to implement it.
Why describe responsible investing as active and universal ownership? As a pension fund we see ourselves as real asset and universal owners. This means we recognise that through our portfolios we contribute to and own part of the econ- omy as well as a slice of the market: what we do today should not compromise tomorrow’s outcomes. Actions today should enhance portfolios along with the prospects of the economy and for the market as a whole. That is the starting point when we talk about Railpen’s mission to look at sustainability and universal ownership in the widest economic and market sense.
What does ESG and responsible investing mean for Railpen?
It is incorporating ESG and sustainability considerations into our investment pro- cess. It starts with the trustee’s invest- ment beliefs, which completely incorpo- rate ESG and climate considerations. These are essentially systemic risks across portfolios. Liabilities and governance could be classified by themes like climate
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change, modern slavery, responsible tech- nologies and sustainable markets. These are themes from a top-down perspective that are incorporated into the investment process.
And we do bespoke analysis by asset class: equities, fixed income, infrastructure and all of the private markets when dealing with and incorporating sustainability.
How long has ESG been part of your overall investment approach?
It has been part of us for at least a decade. It started with being heavily focused on governance – which it still is – and then built out into more granular sustainability themes and then into the investment process.
Railpen aims to cut greenhouse gas emis- sions in half by 2030 and achieve net zero by 2050: how are these plans progressing? In 2021 we set out our net-zero analysis with a roadmap of how we are going to get there. We are signatories to the Institu- tional Investors Group on Climate Change and use the net-zero investment
framework to determine how we look at emissions across our portfolio. The first step is looking at financed emis- sions. We assess how much, in terms of emissions, we are financing in our public equity and fixed income portfolios. That leads us to look at where the emissions are and where they are coming from. Then we look at the key emitters, which turned out last year to be 42 companies, to help form our net-zero engagement plan. That means we engage with those compa- nies to see how aligned to net zero they are and understand areas of misalign- ment according to our Climate Risk Net Zero Assessment Framework, which defines the different pillars for net-zero compliance. We take those areas of mis- alignment and that goes into our engage- ment and voting policy, focusing on the climate transition and how well compa- nies are doing in these areas of misalignment. Another side is
looking at transition
investments, at climate solutions. We have a real assets portfolio that invests in wind farms and solar farms.
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