consistent is difficult because we are trying to look at the future. It is important to remember the limitations of some of these meas- urements. If you overdo it you end up with things done to suit a process and to tick a box rather than focusing on the key long-term fundamental issues, which is about making good credit decisions. Freedman: It puts more expectations on managers to talk about what they are doing and how they are doing it. For us, it is about being as transparent as possible with the companies we engage with.


Clients need to be aware that we are trying to encourage issuers to disclose as much useful and consistent data as possible. It’s about reporting and transparency disclosure through to the end client.


PI: How creditable is the independent ESG data that is available? Gull: If you look at the correlations of ESG ratings from the three providers between issuers that get good ratings are low. That tells you that picking up consistent data points is not easy in this space, but it does not mean that useful information is not encapsulated within them. We use them as a way of finding out where we need to screen and do a bit more work or they are high- lighting a certain risk. It does not mean that we believe them


because we get another rating that tells us something different. They are not like credit ratings, which are much more closely bunched together. Freedman: We have seen an example of an ESG rating that was a copy and paste where the wrong company name was in the title of the report. So you have to carefully consider what you are looking at. Gull: It is how you interpret that data. You are using it as some- thing to signal further research. Pickering: It is wonderful that we have had a quality debate about trying to match the needs of the users of capital with the providers of capital.


It is inherent that we make sure that this quality debate is not undermined by get-rich-quick charlatans who will abuse the spin to make money and in so doing destroy the things that were discussing. There is hope that as we see consolidation, whether that’s in the defined benefit space with insurance or defined contribution schemes into master trusts, we are getting the scale that allows us to do things that we could not do when most pension schemes were sub-scale.


Scale is not everything in every walk of life, but in the areas that we have been discussing today, scale is an asset rather than a liability.


February 2020 portfolio institutional roundtable: ESG and fixed income


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