important to not get lost in the middle and lose the forest for the trees.


It is key to have a holistic approach, contextualize the key ele- ments and their applicability to your business or your portfolio. In principle, disclosure is never a bad thing. Materiality, standardisa- tion and contextualisation are all key to making sense of regulatory disclosure and applying it to your business or portfolio. Investors have a responsibility to not treat disclosure as a box- ticking exercise and as an end in itself. They need to ask them- selves what it means for their portfolios and use it as a lead-in to identifying and managing key risks and opportunities. Jones: It is worth remembering that regulations like TCFD are relevant in two ways: we have organisations using the data and organisations producing it. From an investor perspective, better disclosures by companies to inform investment decisions are helpful. But the act of put- ting together the disclosures is also helpful in terms of driving the decisions and the actions that are taking place. So TCFD has the potential to drive better behaviour by all the organisa- tions that have to report – the asset owner, asset manager and the underlying companies. Gopinathan: There is the element of disclosure metrics and assessment metrics. The preparer is the one who creates the disclosure, the user is the one who needs to assess the same. While they both are different methodologies serving their respective purposes, but it is important that they are co-ordi- nated and have a feedback loop in place so they align and con- verge over time. For example, currently, if a discloser or preparer publishes unverified targets or metrics data, the user can highlight the need for third party verification. This feedback loop needs to be maintained because those are two independent sets which eventually need to align and become seamless over time. It is similar to the credit rating space, where a company posts its financial metrics and a rating agency and an investor each do a credit assessment. They do different things but use the same information. That needs to happen independently. That is a step forward, for sure. McAllister: On regulation, particularly SFDR, what is supposed to be a disclosure regime is turning into a labelling regime. You can no longer sell an Article 6 fund, which is a normal fund. That distribution route is now difficult within Europe, so there should be a wall of money heading towards the few secu- rities that meet the Article 8 [sustainable funds] and Article 9 [impact funds] labels. But the valuations of those stocks are not rising, so something is happening with a lot of funds labelled Article 8 and Article 9, but the securities that you would imag- ine seeing huge flows are not going up.


There is this transition phase where some of the labels being added to funds are somewhat aspirational at the moment.


12 October 2022 portfolio institutional roundtable: Responsible investing


Biodiversity might not be a focus at the moment, but it will probably be the next cab off


the rank. Robert Campbell, USS Investment Management


Are you seeing many institutional investors divesting from non-ESG compliant assets? Jones: The discussion on divestment versus engagement has matured. Three or four years ago, there was a lot of discussion about divestment and ex-fossil fuel funds. Nowadays, the dis- cussion is much more nuanced, with a higher recognition that you need an escalation strategy.


It is no good having ongoing dialogue with a company if ulti- mately change is not happening. You need objectives in that engagement with time limits. If the engagement is not work- ing, you step up a gear. In the first instance that may not be divestment. It may be voting against the chair, but ultimately divestment should be part of the escalation process. Of course, you are holding a company because you think it is a good investment. You should not be holding it because you want to engage for the good of society. Engagement is a tool to make a good investment, a better investment.


Callum, have you ever walked away from an asset due to a failure of engagement? Logan: From a divestment perspective, we are focused on the UN Global Compact. The companies we own should adhere to


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