It has helped us to develop credit and equity products where we can say that these companies are neutral or positive on their contribution to the Sustainable Development Goals. Czupryna: We have included SDGs in our analysis framework for the past three years. What we find is that some SDGs are easier to invest against than others. For example, SGD 4, which is about fostering education, is harder to make a positive contribution to because it is a niche sector. The SDGs were not developed for investors; they are the world’s to do list. Werf: What is so powerful about the SDGs is that our engagement narrative has changed. We can put a dot on the horizon and tell companies that you might be getting good ratings on minimising your impact on water or plastic, but if your products are not delivering the solutions needed by 2030 you are not making the cut. That message is landing with companies when they say these are the areas they need to start making plans in. Curtin: We look at it in asset classes where there is tangible evidence, such as infrastructure or forestry, where you can see that long-term investing horizon. It is useful to think about it through an SDG lens, but in the listed-market space where you have a diversi- fied product portfolio it is a lot harder.
PI: So ESG-led investing is not just about equities. How are you applying it to fixed income? Czupryna: The green bond market specifically targets a couple of SDGs, so it should be easier to invest sustainably here than through equities. Equities are a secondary market, so we are not directly financing companies, while we are funding spe- cific projects through the bond market. ESG in the bond market is straightforward, but the challenge is that it is hard to track how companies are using the funds that they raise. Social bonds are starting to make headways in providing investors with a way to activate their ESG objectives. Ramscar: ESG is not just about equities. In fixed income, companies that miss-manage ESG factors are more likely to be downgraded or to default. So ESG lends itself well to the fundamentals of fixed income investing. Mason: Responsible investment is just a way of going about your business as an asset owner. It applies to all asset classes. We are seeing developments in some of the tougher asset classes, so we have reached the point where responsible investing is unstoppable, but it’s still coming of age.
November 2019 portfolio institutional roundtable: Responsible investing 21
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