portfolio institutional: How is Ealing integrating ESG into its invest- ment portfolios? Bridget Uku: I have been at Ealing long enough to see how ESG has transitioned over the years. We have moved on significantly from having a fairly ESG-agnostic board to one that is particularly aware of the importance of investing sustainably and cognisant of the financial risks that can arise from investments in fossil fuels as we migrate to a low carbon economy.


Our stakeholders are constantly asking us what we are doing with regards to ESG. Initially, they asked us to divest from tobacco. It was more ethical, but one thing we have established is that our val- ues cannot trump the value we need to create for the fund. Recently, we have moved some of the equity allocation into pas- sive. We took the view that we needed to invest in a tilted strategy, so we opted for a customised low carbon fund. We also want to make more of an impact with our investments, so we will probably consider investing in something like a renewables fund and invest directly in areas that will have a positive impact as well as earn a decent return for the fund. We are constantly asking our managers to explain how they are embedding ESG into their investment decision making. It does not matter if it is the bond manager, private debt manager or equity manager, we are constantly questioning them as to how they are doing it.


PI: Being a charity, what is more important to the Joseph Rowntree Foundation: making a return or making a difference? Jonathan Levy: We have an endowment, and a small percentage of that has been carved out specifically for social investments. Through the endowment we look to make returns to finance the main charitable activities of the Joseph Rowntree Foundation. Our social investment portfolio is about social returns. That is the pre- dominant aim with financial returns being a secondary objective.


PI: You also represent a charity, Anita, so is your priority to make a return or to make an impact? Anita Bhatia: We manage the endowment to maximise returns to support our charitable work. The greater our returns, the greater the scale of our charitable work.


As an urban health foundation, we exist to improve peoples’ lives. So, we have an investment policy that sets out our commitment to responsible investing. We want to ensure that the managers we invest in, because we make fund investments through our endow- ment, also invest responsibility.


When we meet and monitor managers, we ask them questions about their impact on the environment and what they are doing in relation to social issues.


This applies across asset classes. Two years ago, we introduced our impact investment strategy, which is a 5% allocation from our endowment. The objective is to seek commercial risk-adjusted


8 May 2020 portfolio institutional roundtable: ESG


returns, but we are also looking to make an impact, specifically a health impact, in the UK. We have made significant progress in incorporating responsible investing, ESG and impact considerations into our financial deci- sion making.


PI: What ESG metrics do you report on to the Church of England’s investment committee, Stephen? Stephen Barrie: In terms of ESG, the picture has evolved over time. Originally it was about restrictions – there’s evidence of the Church using investment restrictions going back to 1948 – but since the 1970s there has been an emphasis on engaging with cor- porations in the portfolio. More recently we have stepped up our stewardship approach and have emphasised partnerships with other investors, and the development of publicly-accessible invest- ment tools, such as the Transition Pathway Initiative (TPI). For our investment committee, we report on ESG across the port- folio, which includes controversies, ESG scoring and climate met- rics, including TPI data. We monitor our asset managers through a bespoke framework that incorporates climate change metrics. For example, the weighted average carbon emissions for the portfolio, relative to


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