working with our quant colleagues a lot more than we did. His- torically, ESG was about equities, but more and more asset classes are involved now.


Where we do not have emissions data, in private markets, for instance, we now have the tools to come up with an estimate internally. It focuses minds if we tell a company we are mark- ing them against a certain number.


Standardised ESG scores as a business has proven to be a case of the tail wagging


the dog. Chandra Gopinathan, Railpen


There are massive risks now for people failing to deliver what they said they would on ESG. Perhaps a good business for con- sultants could be holding mock exercises where they come in and check that we are doing what we said we are. Jackson: There will be more regulation, which I hope will be harmonised across the board and pave the way for less greenwashing.


The themes we will look at are going to be more complex. Now that people have finally got their teeth into what climate risk means, the TNFD is to publish a framework on biodiversity. This will be complicated for people to understand from an investment risk-return perspective and yet complexity should never be an excuse for inaction.


Where will responsible investing be in 10 years’ time? McAllister: There will be a clear alpha versus impact split on why you are investing responsibly. Distinctions will be clearer on what is going on in portfolios and why.


Another issue will be evidencing that. If you say you are using ESG to better understand risk, you will need a load of exam- ples to back that up. If you claim you are making an impact through your investment choices, you need to demonstrate that beyond trading shares in the secondary market, which is just moving money around the system rather than providing additionality.


The industry will be forced to show it is doing what it claims it is, which will be a good thing. Gopinathan: Responsible investing is moving on a spectrum. It started being a policy and governance function but is matur- ing, getting more focused, generating more performance data and moving towards risk management and impact. Through becoming more focused, bespoke and specific by asset class, hopefully responsible investing policies will enable investors to be a lot more impactful longer term. Campbell: There will be an increased demand for data. We are


What I would like to see is more additionality evidenced as a result of ESG efforts to drive momentum whilst we recognise that things simply need to change. You cannot always bang the drum for financial returns. There is always a risk of hidden externalities quickly becoming inter- nalised without warning, but we do not need to prove that link to make the world a better place for our beneficiaries. Jones: The conversations around responsible investment are becoming more sophisticated, more nuanced and that will con- tinue. Part of that nuance is recognising the distinction between risk management, financial outcomes and real-world impacts. But the conversation needs to evolve to consider what fiduciary duty means. Hopefully, it means moving away from a focus on the immediate financial impact on our members to thinking about the real world more holistically. This means considering the quality of life of members while recognising the intercon- nectivity of everything. If we do not look after the long-term health of society and the environment, we are not going to have a long-term healthy economy to provide financial returns. We need a holistic systems-thinking approach to underpin responsible investment. Logan: Regulation will increase but I fear it may not be harmo- nised. That is going to be a challenge as you invest in different jurisdictions.


There is also an element of how we communicate with mem- bers on this because whilst the increased reporting is valuable to asset owners, there is a lot to digest. So better communica- tion with members would be positive.


October 2022 portfolio institutional roundtable: Responsible investing 19


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