ESG | Event
“Even if you have a small asset allocation, you can still make a difference. It depends on the issue,” Tankwe said. “At Ircantec we favour collaborative engage- ment, because you are not alone. It is about influencing companies.” Van Hyfte added that investors need to be realistic in terms of the impact that they can have by engaging with companies. It is also a matter of exchanging information needed to assess the company. “If you talk about the Apples and Micro- softs of this world the impact is minimal on an individual basis,” he added. “Look at Shell. When it comes to disclo- sure, it has caught up enormously in the past few years. Is that connected to one asset manager? No. It is because the mar- ket is moving and it is being articulated on what oil companies should do. “The oil majors have a massive impact on climate change and how they allocate capi- tal. Those collaborative initiatives are efficient. “You are not going to achieve the objective straightaway, but it increases the awareness
from a company perspective,” Van Hyfte said. “That is not a short-term game, it is something that evolves. It is also being focused and targeted on what you want to achieve.” But many final salary pension schemes are approaching their endgame and so will have fewer equities, so credit becomes more important.
“The elephant in the room is fixed income,” Van Hyfte said. “There is a lot to do on that side. The impact it can have is underesti- mated by the markets. I do not agree that ESG is less material from a fixed income perspective.” Maturity and duration are important aspects but need to be refinanced. If com- panies do not meet the agreed objectives then investors could refuse to refinance the debt. “It can be an instrumental part to have impact from the fixed income side,” Van Hyfte said.
This could bring its own problems. Depriv- ing companies of capital could see their cost of capital rise and so they have less cap- ital to invest in renewables.
So another major challenge to implementa- tion is factoring the consequences of your actions into your decisions. Van Hyfte said that phasing coal out of Candriam’s activities has a social aspect to it because it impacts communities. Poland is exposed to thermal coal, for instance. As an investment community we should not bear sole responsibility of sustainable development. “We are a player in this and we need to come forward with solutions, but we can- not bear the brunt of all negative side effects of divesting from something,” Van Hyfte said. “If you divest from tobacco they have employees. “Every scheme is unique and so comes at ESG from different angles,” he added. It sounds like a one-size-fits-all approach will not work, so how do asset managers approach a new ESG mandate? “We have a philosophy and a framework,” Van Hyfte said. “You adapt it if you feel the objectives are not being achieved. It is a journey that you assess along the way,” he added.
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