ESG | Event
Montreal Pledge [a commitment to disclose a company’s carbon footprint]. That gives us an indication of where the biggest emit- ters are in the portfolio.” The scheme is a signatory of the Task Force on Climate-Related Financial Reporting. This requires RPMI to report on how it is managing climate risk, which encourages scenario analysis to understand how climate risk fits into asset allocation. “The aspiration is that climate is a legitimate risk, like interest rate risk or longevity risk, so pension funds should look at it in that way,” George said. “ESG has tended to be separated but it should be part of the risk dashboard that applies to the overall risk management of any financial institution. That is the direction of travel.” The debate then moved from policy to implementation. George said institutions have a range of tools to deal with companies and that engagement is the scheme’s preferred
approach to effect change. Exclusion and divestment are options when those discus- sions are not successful. Human capital management is an issue that RPMI Railpen considers when invest- ing in companies. “It is possible to incorpo- rate this into our decisions, but it depends
of where if you can manage the energy con- sumption you could make a more profita- ble investment. Areas like tobacco are a lit- tle more difficult. Whether or not you should remove it from your portfolio depends on if your objective is financial or social.
The problem with ESG is that it has always been black and white. You exclude or you don’t exclude. Well, it doesn’t work that way. There are 50 shades of grey too. Wim Van Hyfte, Candriam
on what you are buying rather than having a rule for human capital management,” he added.
“This reminds me of a Warren Buffet quote that investing is simple but it is not easy. ESG is similar,” George said. However, some areas fit quite easily into ESG integration. Real estate is an example
Other challenges include what to do with the data you collect from measuring carbon footprints, George asked. “It is not obvious that you should reduce the number because the data is not that reliable and there are many different measures of carbon expo- sure,” George said. “So you have to form judgements and take a view. With certain
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