ESG is a modern way of ensuring that wealth creators create more long-term wealth than they destroy. Alan Pickering, BESTrustees


So going back to the sensible principles rather than legalistic defi- nitions is a good approach. Nummela: Someone needs to give a little bit of a push on standards and regulations because it is a useful signalling effect. In conver- sations with asset owners, if there is something out there like the EU saying that you need to be 30% below your current carbon intensity that is a starting point to be on a 2-degree path.


PI: When it comes to assessing ESG in mainstream bonds, what are investors looking for other than making an environmental impact? O’Neill: Governance is hugely important. It is the foundation of most of the questions we are asked. It goes back to the fundamen- tal credit analysis, of which the ability of management to execute a strategy over the long term is a major part. If you have a board that is not sufficiently skilled to do that or the control mechanisms are inadequate, then that will pose a threat to the ability of the company to operate efficiently. Gull: That has always been the case. In years gone by, we have turned down investments because we did not like the governance, we did not think management had a handle on things or had the right people in place. That will never change in fixed income investing. It has always been core to determining whether you are prepared to lend somebody money for a long period of time or not.


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February 2020 portfolio institutional roundtable: ESG and fixed income


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