Responsible investing & Covid – Cover story
RESPONSIBLE INVESTING & COVID-19
Asset owners’ commitment to responsible investing and the effectiveness of such strategies are being tested like never before. Banking crises, stock market crashes and recessions have all happened since responsible investing’s popularity started growing across the institutional investment industry, but it has faced nothing like Covid. People becoming prisoners in their own homes to avoid the virus led to the UK economy contracting by a fifth in the space of a month. A lower than expected recovery and record rise in redundancies are further evidence that these are unprecedented times. Will asset owners ease the pressure on their portfolio compa- nies to adopt sustainable practices during tough economic times, or is responsible investing needed now more than ever before? In September, we brought five asset owners together to discuss the impact that the pandemic is having on their responsible investment strategies.
Covid-19: Everything’s changed Consensus points to tough times ahead of us with unemploy- ment rising as restaurants, pubs and entertainment venues have been hit hard by the pandemic. So this recession is dif- ferent from the last one and begs the question, how will those investing responsibly perform in such a difficult economic environment? Danyal Sattar, chief executive of direct social impact investor Big Issue Invest, points out that the UK has not endured a high unemployment recession for decades, noting that the gig econ- omy and workers sacrificing pay rises helped avert one during the 2008 financial crisis. “So, we are coming into tough times,” he says. “The charity and social enterprise sector is extraordi- nary resilient. They tend to go bust less than other small to medium-sized enterprises.
“Our portfolios are performing reasonably at the moment. About 10% of our small loan portfolio is off schedule in terms of repayment and we have not had any failures on the larger investment side. So, I would not be surprised if we are under- performing in terms of business failure because of the extraor-
dinary resilience of the charity sector. It is pretty grim out there, but I suspect that we are not the worst hit.” Aaron Pinnock, an impact investment analyst for the Church of England, says that the impact scene has grown in the past five to 10 years. “We are looking to use our money to enhance real world outcomes for society and the environment. The bulk of our attention in the impact space is on climate but, being a faith-based investor, social outcomes are important to us. We see climate change as the number one priority because of the systemic impact it has on our portfolio.” Climate change also features heavily in Brunel Pension Part- nership’s discussions with its portfolio companies given the impact it has and the inter-connectively to biodiversity and water stress, says Helen Price, a stewardship manager for the pool. “Some of the other topics we are discussing are around diversity following the Black Lives Matter protests we have seen globally and the impact it is having on certain areas of society,” she says.
Price adds that Brunel is looking at all areas of diversity. “We have been discussing with asset owners and managers on how they are looking at ethnic diversity and integrating that better going forward. “We have acknowledged that some of the focus in the past has been on gender. Where the discussions have been more diffi- cult it has perhaps been avoided. So, we have highlighted that we would like to see better efforts in terms of ethnic diversity going forward.”
The social pillar of ESG has also been on the agenda for the pool. “It has been an area where it has been difficult to engage on as there has been a lack of data,” Price says. Brunel has joined the Workforce Disclosure Initiative, which is seeking to provide information to investors to assess how com- panies are handling this area of risk and looking after their staff.
“The employees have been the hardest hit during the pandemic,” Price says. “The social issues are the ones that are emerging as topics that asset owners and investors are starting to discuss more with companies going forward.”
Issue 97 | October 2020 | portfolio institutional | 25
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