ESG interview – Nest INTERVIEW – DIANDRA SOOBIAH
“It is important to achieve real- world impact through engagement, rather than just decarbonising our portfolios.”
In the first of portfolio institutional’s asset owner interviews looking at ESG integration, Diandra Soobiah, Nest’s head of responsible investment, explains how the master trust is playing its part in decarbonising the economy and promoting human rights.
How are you influencing Nest’s ESG strategy? I have been with Nest for just over 13 years, so quite a long time. ESG has been at the core of our investment approach since our inception, and I’ve helped develop our responsible investment approach, inte- grating ESG across our strategies. That includes addressing a range of ESG prior- ities that we have been thinking about. A lot of our work has been driven by a belief that ESG issues are likely to be financially material over the long-term and will impact member returns at retire- ment if we do not address them. The ESG priorities we focus on are pri- marily climate change, human capital, technology and, more recently, natural capital and sustainable food.
These are issues we have selected because we feel there is a clear link to financial materiality and that they align with our members’ views and expectations.
One example of that is the climate-aware tilt across your global equity portfolio. How does this affect your investments?
Essentially, it just means managing our members’ money in-line with our invest- ment beliefs and their expectations. It is also in-line with our fiduciary duty, con- sidering that climate risk is likely to have an impact on member returns at retire- ment. That is why we put a lot of emphasis on risks like climate change, which we be- lieve are likely to play out over the long term. We have built a climate-tilting approach for our developed and emerging market portfolios to reduce exposure to the riski- est companies from a climate perspective. This includes companies that are not on an upward trajectory of carbon emissions, companies that are not committed to de- carbonisation or are not reporting to their shareholders on what they are doing. These are the companies that we look to be underweight while investing more in companies with better disclosures and transparency.
That means you are not necessarily divest- ing from energy companies as such, but instead focusing on companies that are doing better?
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We focus on the transition, rather than divestment. We are trying to encourage companies to make those changes and to be more transparent in how they are man- aging those risks. We want them to put out a robust plan of how they will imple- ment those changes over the short, medium and long term. We are focussed on engagement, with companies directly and via fund manag- ers. We have engagement programmes with some of the biggest laggards and where these companies have not met our objectives, we divest. Last year, we divested from several com- panies [Exxon Mobil among others] on the back of poor progress and a lack of willingness to engage.
Many energy companies have benefited from the surge in wholesale prices. How has the energy crisis affected your portfo- lios with a climate tilt? From a climate standpoint, our strategy has performed as expected. Obviously, we are generally underweight the fossil fuel sector, but we are trying to be neutral or
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