Esmée Fairbairn Foundation – Interview Collaboration with other investors something we are looking at.
And as well as making grants, we also have a social investment fund and an impact fund. There are various ways we can make a difference and the boundaries between impact and social investing are likely to blur over the coming years.
What benefits does being a signatory of the UNPRI bring to your foundation? The biggest benefit it has brought to us is to prompt conversations internally about how can we use the endowment in line with our mission.
The UNPRI has its detractors. Organisa- tions fill in their returns and there has been no obligation to audit them. But the requirements have been made slightly more robust and there has certainly been an increase in considerations of ESG and responsible investing policies. It is then down to asset owners, for example, in- vesting into funds, to find out if these pol- icies are backed up by action.
How do your £40m social investment fund and a £10m allocation to impact investing work? With our social investment fund, we focus on impact first and then aim to get our money back. The impact fund is one where we treat financial return and impact equally. The investments in this latter fund will likely
include leaders in measuring
impact. We have worked with the Impact Investing Institute for a while now and establishing a dedicated fund was a natu- ral progression of some of that work. Also, this is part of a bigger trend, because over the next 5 to 10 years managing capi- tal is not going to be just about financial return; it is going to be about impact.
The plan is to invest more of your portfolio in impact, then? It is early days but looking at trends in the market, we think the opportunities in that area are only going to increase.
is
You were a founding member of the Charity Responsible Investment Network. What is the idea behind that?
It is a network for relatively large UK foundations to discuss responsible invest- ing. It is about idea exchange, discussing trends and looking at engagement oppor- tunities. This has led to, for example, an initiative asking banks to disclose their climate targets.
How does being a charity differ from other forms of institutional investment? Charitable endowments often have the advantage of being genuinely long-term investors. We are guardians of the endow- ment for future generations. We also have fewer stakeholders than some organisa- tions, so it is incumbent on us to make sure we are moving in the right direction.
Are asset managers up to the task of man- aging charity money? It is a competitive market. But when you look at it from a responsible investment perspective, the percentage of those genu- inely doing it – rather than saying they are doing it – is low. Well below 50%. There is a lot of greenwashing out there. The challenge for us is to identify, the asset managers who can work within the remit of our portfolio. But this situation is improving steadily.
How can we get rid of greenwashing? We are working on getting full disclosure from managers who do not provide it. Disclosure is a starting point. The next priority is for investors to chal- lenge managers with questions based on that. For example, sometimes it can be as simple as picking out an individual stock within a fund and saying: “This looks inconsistent with your policy.” Another is to ask: how involved are the senior people within the organisation in the responsible and ESG investments? That is an indicator of the organisation’s commitment to ESG.
MATTHEW COX’S CV
August 2013 – present Esmée Fairbairn Foundation Investment director
March 2012 – July 2013 Julius Baer International Head of investment
July 2010 – March 2012 SG Hambros Equities specialist
1999 – 2010 UBS Asset Management Portfolio manager
What has been the biggest lesson you have learned since you joined the foundation nine years ago? Ignore the noise and trust your own judgement.
What has been the biggest challenge you have faced in this role? Money should be deployed to make a dif- ference. Focusing on high returns and ignoring externalities is not a sustainable strategy longer term. So when you come up against the oppo- site view, it always surprises me and can be a challenge. Focusing only on the short term – over one or two years – can be counterproduc- tive. It is important to stay focused on sus- tainability further out and, as I say, do not get distracted by the noise. It comes back to first principles.
Although you are a long-term investor, does the uncertain economic outlook worry you? We will stay fully invested. We may make some changes in the portfolio, but they will be on the edges. We have not held fixed income in any material level for a number of
years. But that may now
becoming more interesting again. But for us, it is all about being invested through the cycle.
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