Feature


For Manuel, it is interesting to see the behavioural changes that have resulted from existing mandatory disclosure requirements. Pension funds have to put their policies on their website and they have to disclose in an annual statement how they have delivered on those policies.


“What I have seen when working with trustees, is that it changes the way they approach these issues knowing what they are saying what they will do and what they do will be played out in the public arena,” Manuel says. “They can be judged more easily, they can be compared with their peers more easily, they can be called out more easily or they could be celebrated more easily. “For me, the transparency and disclosure piece is the critical ele- ment for the whole drive for pushing the sustainability agenda,” Manuel says.


And this needs education, Wilson-Otto says. “ESG risk is not just about disclosure and compliance, it is a strategic exercise. “We want issuers to see that a lot of the ESG analysis and corporate transparency is not only a regulatory requirement but as a way of better assessing the risk that they will be exposed to in the future. This should be very much part of the strategic everyday operations for the business.” “That mindset shift is happening, but it still needs more capacity


building globally,” he adds. Could the new European Mandatory Disclosure Regime help cre- ate capacity? It proposes disclosures across all entities within the financial system, including pension funds, investment funds and financial services firms.


An independent view


One area where pension schemes can source the data they need is from independent providers. Yet these companies have different approaches to collecting and interpreting the data, which means the outputs vary. “Some commentators say that is a problem, but I don’t think it is,” Manuel says. “It means that it is important to understand the methodology they have taken in their approach. You cannot take the output at face value, you need to consider it within the meth- odology that they have used to create that output. “The range of providers gives people a choice to find a methodology that aligns with what they themselves have tried to achieve in using that data.


Do I think the world would be a better place if every ESG data provider gave the same output? No, I do not.


Tim Manuel, Aon


“Do I think the world would be a better place if every ESG data pro- vider gave the same output? No, I do not,” Manuel says. Manulife Investment Management assesses independent ESG data from several sources, which helps the firm to mitigate against bias risk. “I try to differentiate between what is truly a weakness, an area in need of improvement or a lack of disclosure or percep- tion of risk. We need to distinguish between that,” Isleib says. BNP Paribas AM relies on a combination of third-party data pro- viders for the raw underlying data on the companies it covers. The asset manager has its own people looking at ESG issues in each sector allowing them to enhance that data.


It looks at the raw underlying data on the performance of a company rather than their views and assessment of an issue. “We do find bias typically to do with company size, region and sec- tor. We try to minimise in the construction of our ESG scoring framework any bias associated with those factors,” Wilson-Otto says.


If investors do not get the information they need, they can apply pressure through raising their hand to vote against management at the AGM. This is a last resort and could be taken as a sign that engagement is failing. It is in a corporate’s best interest to practice high standards of transparency. Just ask professional trustee Alan Pickering, who has chaired industry bodies and produced a gov- ernment-sponsored report on the pensions industry. During a panel discussion portfolio institutional hosted on emerging market debt late last year, he explained why. “The better governed coun- tries and corporates are, the more accessible they are to institutional investors,” he said. So, the greater the level of transparency, the greater potential for attracting capital. Perhaps the change in approach by regulators may prove successful longer term.


March 2021 portfolio institutional roundtable: Responsible investing 25


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