Private markets is an area where ESG can be well integrated. Kate Brett, Mercer Investments


port that and maybe other asset owners who may not have been looking at the venture space might be waking up to its potential and scope to integrate ESG considerations into the DNA of start- ups. There is a lot of potential to bring about change and asset owners can be part of that. Barrie: We have been looking at the other end of the spectrum: big tech firms. We have an Ethical Investment Advisory Group that provides ethical investment advice and guidance based on Chris- tian ethics. We have about 20 advisory policies, all available publicly. The topic that they are looking at next is big tech, looking at the ESG and eth- ical investment concerns at Amazon, Apple, Google and others. Part of that is data governance, but it’s a slightly different angle on ‘cyber risk’. We have been involved in an investment coalition around the Christchurch shooting being streamed live and have been attempting to engage with Facebook on that. There is an interesting area of overlapping concern where ethical investment, responsible investment and ESG should be asking the same questions - big tech firms do after all need a social licence to operate. It is something investors are likely to be looking at more intently in the future.


PI: Are your clients concerned about cyber risk, David? Czupryna: Cybercrime is a major risk that we assess in the compa- nies we invest in.


There are two types of cyber concern. One is the risk that private 10 May 2020 portfolio institutional roundtable: ESG


data will be leaked to the public. The other is disruption to a com- pany’s operations. For instance, Tarket, a European industrial company, recently saw its stock price fall by 8% after it was the victim of a cybercrime campaign. Attacks like this happen every week. Depending on which report you read, the cost of cybercrime glob- ally is estimated at between $100bn to $6trn a year and is growing. So, we take this seriously when looking at companies.


PI: Will the EU’s proposed climate benchmarks for equities and bonds make it easier for investors to reduce climate risk in their portfolios? Uku: It will provide a framework to measure the alignment of an investment portfolio. That would be a standard against which we can measure the solution that has been provided by the industry. It will have some pitfalls, but that broad framework is good. Brett: It probably will take some time to refine as to how useful the industry finds it, but it is a good first step in the right direction. We see a lot of indices being developed that are ESG branded, car- bon branded or climate branded. We also see a lot of these indices tinkering around the edges of, and making small changes to, a standard index. We are seeing an increase in asset owners wanting to be Paris aligned or set net-zero targets and there’s a recognition that the small tinkering around the edges does not put you in that position.


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