ESG: Do the right thing


Changing the world is hard work. Just ask pension schemes that factor sustainable poli- cies into their investment decisions. Indeed, asset owners wanting to stamp out inequality, improve employee safety, make companies more transparent and reduce man-made damage to the environment need to do more than just read analyst notes and examine a few balance sheets. The hard work does not end there; it is only just beginning. This was one of the main points made during portfolio institutional’s recent environmen- tal, social and governance-themed roundtable. In the absence of perfectly sustainable companies, investors will have to use their influence, as one participant put it. Yet changing companies from within is easier said than done. The process can take years before any real change is evident, if it works at all. Engagement is proving to be a major factor in ESG-led investing’s change from an ideal held by left-wing anti-capitalist protestors to a mainstream return-generating investment strategy.


The impact that the upcoming Department for Work and Pensions’ climate change dis- closure policy will have on institutional investors was also on the agenda. The government responding to public and savers’ concerns over the damage being done to our environment is another sign that using huge pools of private capital to help build a better world is becoming a mainstream strategy, if it isn’t already. Yet despite people blocking roads and gluing themselves to the entrance of the London Stock Exchange in recent months, ESG is not a story of revolution, but one of evolution. This is apparent in the way that investors are now constructing their portfolios. Today, asset owners like to use their capital to make a positive impact instead of just cut ting off the funding of companies that do not match its sustainability policy. This approach is having an effect on making companies behave better. Shell’s plan to cut its carbon emissions that was announced in December is an example of where talk- ing to management could, if you are patient enough, make a difference. You can read more on how the strategy is changing and what to consider when setting an ESG-led investment policy from page 4.


Mark Dunne Editor, portfolio institutional


Contents P4: ESG roundtable


Asset owners, fund managers, consult- ants and those promoting responsible investing debate one of the biggest investment issues of our time.


P20: Sustainability considerations cannot be optional Lombard Odier’s Nathalia Barazal dis- cusses the role that convertible bonds can play in an ESG investing strategy.


P22: Sustainable investing in multi- asset and equity strategies M&G Investments’ Maria Municchi con- siders the various approaches to tar- geting attractive returns while investing responsibly or sustainably.


P24: Newton’s approach to responsible investing Rob Stewart discusses his team’s sustainable investing strategy.


P26: The ‘S’ word


Climate change and governance have traditionally hogged the ESG headlines, but now social issues are getting their fair share of attention.


May–June 2019 portfolio institutional roundtable: ESG 3


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32