ESG industry view – Responsible Asset Owners Global Adrienne Lawler is chief executive of RAO Global ESG IN A POST-COVID WORLD


It is odd that at a time when we are going through physical distancing, we find our- selves uniquely united. The universal need for leadership will take us on a route to a better place, individually, collectively and corporately.


ESG-led investing, talked about for years, but only picking up true momentum and commitment in the past five years, could also be massively impacted by the current crisis in one of two ways: the market could execute a knee-jerk reaction to the need for returns by investing with disregard to eth- ics, sustainability, climate change or govern- ance. Or…it could take a deep breath, put its big boy (or girl) pants on and look at the facts.


Opponents of socially responsible investing (SRI) argue that the application of non-fi- nancial considerations, such as ESG factors, to the investment process must result in lower investment returns because the num- ber of investment opportunities is reduced. The facts, however, contradict that view. BNP Paribas Climate Impact fund has returned 27.3%, YTD, according to Morn- ingstar, while Pictet Water has grown by 26.2% during the same period. Just as the world is having to make a dra- matic shift in the way it does business since Covid-19 came to town, so too does the financial community when it comes to investing, putting SRI/ESG principles at the heart of


strategies which will grow


portfolios. But does past performance in this field of responsible investing support greater com-


32 | portfolio institutional May 2020 | issue 93


mitment to it in the future? Well, there’s good and bad news on that front; from what we can see from the BNP Paribas and Pictet funds mentioned earlier, responsible invest- ing – whether you call it SRI, ESG or any- thing else – regularly outperforms traditional investment strategies within portfolios. But within that statement lies the bad news.


Despite its best efforts, the industry, govern- ment or society has struggled to agree on a uniform way to a) define what SRI/ESG investing is in practical day-to-day terms; b) agree a matrix for measuring and quantify- ing it; and c) establish uniform t ransparency reporting to quickly and accurately separate a green investment from green washing. Fund owners have an absolute obligation to deliver returns to their investors in their role as trustees, governors and keepers of the purse. But they also have to mitigate that against regulation, sentiment and emerging momentum, too. Some believe divestment is the only way to turn bad assets into good ones whilst others are equally adamant that the way forward is to use investor power to influence behav- iour and decision making at boardroom level. More will argue that true change will only come when we shift the emphasis from a passive ‘do no harm’ approach to the more proactive ‘impact investing’ strategies which have transformed access to opportunities for whole swathes of the formerly forgotten. In a post-Covid world, where little is certain, asking people to be brave, principled and bold might seem counter intuitive. But here is where we stand now:


– The slate for what we thought was normal has been wiped clean


– The public appetite for cleaner technology to drive all areas of our lives has been whet- ted by seeing and hearing what a world with less pollution, traffic and social noise is like – Businesses have learnt – quickly and deci- sively – that they can conduct a face-to-face meeting virtually, without stringing a tie


around their neck – and still do business, in some cases, more quickly and effectively than they would in a real life situation. – What we value in life has changed over- night. I’m guessing that the chap on the ventilator hasn’t worried once about where he’s parked his Aston Martin. The woman in the bed along from him has never once asked if this gown makes her bum look big. The child who cannot have a bedtime story from their socially distanced grandparent is no longer worried about having the latest brand of trainers.


Our judgement of others has shifted from envy about their wealth to a focus on who is able to understand the simple mantra: ‘Stay home, save lives’.


In losing nearly 32,000 people (at time of writing) what we have rediscovered is that what matters is people; the ones we love and fear we may never see again. The ones who hold hands with our fearful loved ones as they fight this deadly battle against Cov- id-19, surrounded by masks and the smell of cleaning fluid. Making money and ethical investing are NOT at opposite ends of the scale. They are a necessity. But now we have all been part of the same test of resilience, substance and endurance in life, many are unhappy about the score they had to give themselves for what they thought mattered most and where they placed the value in their every- day life. And as thousands of teachers might have said over the years: “Young Jenkins shows lots of potential, but must focus on impor- tant lessons, not be distracted by fripperies of the foolish around her and work harder to achieve her own values and potential. If she does that from this point onwards, I predict unlimited success, personally and professionally for her.”


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