ESG interview – Railpen


There is more power in collaborative investor engagement with companies. And there is a learning process, where you often need strong scientific brain power to help, and that can be achieved best on a collaborative basis. Working with policymakers helps if you are doing so on an effective collaborative basis.


You have expanded your renewable energy investments. What is the rationale of this within your ESG mission? This falls within the net-zero plan. This has two pillars: the de-carbonisation policy and climate investment. Within the latter there are significant attractive investment opportunities. They provide good greening opportunities for the econ- omy as a whole, whether they be renewa- ble energy investments or in private com- panies offering climate solutions.


You chair the new Institutional Investors Group on Climate Change Bondholder Stewardship Working Group. What does it aim to achieve? Bondholders don’t have the right to vote. We can go in and provide a basis on how to improve the governance mechanism. We point to other investors who are en- gaging with companies and how they can see these engagements being successful. When we buy bonds from a company, we assess their green credentials. There are other frameworks, like The Green Bond Framework, which is a sustainability bond scheme that helps align green bond standards and the EU taxonomy. But here investors need the understand- ing of what is good or bad: which bond issuance is aligned with a company’s net- zero strategy. And the group provides a best practice framework for investors to assess what is a good sustainable bond and how to differentiate. This structure will help all asset owners.


What are your priorities throughout the year to address the ESG issues in your portfolios?


30 | portfolio institutional | March 2023 | Issue 121


sound mundane, it is hardly headline grabbing, but a ‘let’s get to work, let’s get things done’ approach is needed now.


Actions today should enhance portfolios along with the prospects of the economy and for the market as a whole.


In terms of climate, we are moving on with the climate transition, determining what is a good transition plan, what is credible. We are looking at financial disclosures as the Task Force on Climate-related Finan- cial Disclosures kicks in, to use that as a framework in our investment processes. We also have our workforce disclosure project, which is part of the ESG agenda.


What did you make of COP27?


A lot of headlines suggested it was not that successful, and I would agree. It felt like a letdown for a lot of investors, but there was some credibility there. It wasn’t about high-level announcements or com- mitments. It was more a check on how we are doing on the climate front, which for me was real and credible.


It was underwhelming from a financial sector perspective, but more credible from a hands on, ‘how are we doing’, ‘what do we need to do more of’ position.


What do you hope for from COP28? We have a lot of the guidance, frame- works, tools and policies in place. It is now about implementing it all. It may


In that context, where is the investment world in terms of dealing with climate change and the other ESG challenges? It is behind where it should be? Saying we are behind is about expecta- tions. What I would say is, where we are as an ecosystem, between investors, gov- ernment, policymakers, data providers and NGOs, is that for the first time they are all aligned and engaged in the same mission. That is a huge positive. Investors need to leverage off this and move forward. There is now a lot of sup- port to address climate change as an issue.


Do you hear much scepticism around cli- mate change within the investment world? I wouldn’t say scepticism to climate change itself. That is a thing of the past. But there is scepticism around certain things, which is more to do with the devil in the detail. Things like questioning if we are doing things right. Are we doing what we are saying we are? Do we under- stand the technologies?


These detailed discussions are becoming more and more important. It is positive, as it is evidence that we are making pro- gress, but we should maintain those high standards.


What are the biggest challenges you face as a pension fund in addressing the whole range of ESG challenges? We are fortunate as a pension fund, from trustee and management perspectives, that we believe in co-operation when deal- ing with systemic risks. It is, though, an educational process. An understanding of what it all means for our portfolios. That isn’t an insurmountable challenge. It is more about contextualizing things. So, when we talk about ESG and climate you can contextualise it for all the stakehold- ers. But it can be challenging.


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