Event | ESG
types of investments, distressed debt is an example, you might find a great investment but it might introduce large reputational risk. So you need to balance these and for- mulate a review.” Van Hyfte said that ESG is approached in different ways in different countries. In France it is driven from a philo- sophical perspective, while in the UK it is linked to fiduciary duty. He said that the challenge for regulators will be to manage both. He added that scenario analysis should not only be linked to cli- mate change. “You should do it across your assets or factors that you believe will impact your portfolio.” He cites tobacco as an example. It was once on exclusion lists, but it is becoming seen more and more as financially material.
will affect the assets in your portfolio.” Another concern that investors need to define their policy on is that many sectors are involved in building wind farms or developing electric cars, for example, so how does the huge mining effort, and therefore carbon footprint, needed affect
our voting policy to signal where we don’t think that they are doing a good enough job. It is not as simple as removing min- ing stocks, but rather engaging with them to ensure that they adopt sustainable practices.”
Even if you have a small
asset allocation, you can still make a difference. It depends on the issue. Laetitia Tankwe, Ircantec
decision-making?
“It is not only climate it can also be social,” Van Hyfte said. “It can have an impact on the consumer, so you need to know where the risks are in different sectors and how it
32 | portfolio institutional | April 2019 | issue 83
Institutions own a lot of these companies by default because they are in indexes. “We are likely to hold some of this because we are a large investor,” George said. “Engagement with all companies in the portfolio is one way to make sure that they are managing it,” he added. “We use
A TWO-WAY PROCESS This was not a passive discus- sion. The audience had a chance to pick the panel up on any topic that they felt had not been covered or covered in enough detail.
A representative from the BP Pension Scheme asked our panel why they could own a company’s equity, but not its
debt. Tankwe tackled the question by responding that there are different tools you can use depending on if you are a shareholder or a bondholder. “Engagement is easier to do if you own the equity.” Another question was how much of a com- pany do you have to own before you can make a difference?
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