Regulation will increase but I


fear it may not be harmonised. Callum Logan, Coal Pension Trustees


especially emerging markets. Are we applying the same approach to companies and assets across those jurisdictions? If you look at South Africa or India, what does a responsible investment mean? Are you scrapping a coal mine which liveli- hoods depend on? Are you taking jobs anyway without provid- ing a source of alternative income, such as a solar plant where you are improving workers’ lives and creating clean energy? Is that a more holistic approach that would work for emerging markets? We need to move away from a one-size-fits-all approach, so the responsible investment policy relates to spe- cific asset classes and jurisdictions.


Emerging markets need growth, you cannot survive without it. The last thing you want to do is take growth away. So the responsible investment story needs to be more a story of inclu- sive growth rather than climate change or net zero in isolation. There may be fewer opportunities, but they make sense from a holistic perspective and combine environmental, social and economic goals.


income. Plus, with some of the asset managers coming from different geographies, reporting standards can vary. This is why we are committed to calculating the footprint of our infrastructure fund to understand and mitigate impacts and have included a target of 25% renewables within the man- date to capitalise on green growth opportunities.


When investing in emerging markets, how can investors be sure that an asset you own in Africa or Asia is trading as responsibly as the manager claims? Campbell: Data is important. Even if you cannot get reported data, nowadays you can often get pretty good estimates from third-party providers. Your investment style can also help. Having a bias towards quality helps because quality management teams generally consider physical and transmission risks. Having your own fundamental bottom-up research is another benefit. We are lucky to have a team at USS to do the due dili- gence on companies and engage with them directly. Gopinathan: I would take a step back and ask what trading responsibly means across asset classes and geographies


Is the standard of the data provided by specialist companies improving? McAllister: Their broad coverage is relatively shallow but plays a useful input role into some basic elements of responsible- investment research. It is useful to have different views. I do not want them to all kick out the same answer, I want different points of view to make a judgement based on what we think is important. Where I have seen things improve is that there seem to be more specialist sector-based scoring teams, such as the World Benchmarking Alliance. They also give more details on how they score companies. It is a deeper dive than the likes of MSCI or Sustainalytics. That sector-specific specialist type of scoring has improved over the last year. Jones: Our clients use third-party data in a couple of ways. We use it in some of our reporting to give our clients an overall ESG score for their portfolio. This is a tool to have better con- versations with investment managers. We recognise that the scoring systems are just one point of view with scores coming from different providers not being consistent, partly because they are not necessarily trying to score the same things. We find the scores a useful starting point. We want to find out why a manager’s average ESG score is much lower than the benchmark. Which companies are pulling it down? What is the story behind them? Using it as a tool to get beneath the surface and beyond the managers’ ESG policies into the nuts and bolts of how the money is being invested. The scores are also used indirectly by our clients’ investment managers as one of many inputs to an active management pro- cess or in the construction of an index.


October 2022 portfolio institutional roundtable: Responsible investing 15


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