Friday Highlight  

'Doing good’ during Covid-19 is fine, but is it strictly ESG?

No wishy-washy waffle. Find out if there is a clear and transparent sustainability framework, such as a commitment about where they will and won't invest.

You don't want any shocks, for example, if in the future an energy company appears in a fund.

Find their DNA. Look for sustainability running through their DNA; a commitment from the top down on how they’ll treat all their stakeholders from staff to suppliers.

Demand receipts. Transparent and ongoing reporting is critical. Demanding, on an ongoing basis, data showing how they are meeting their ESG aims and outlining their decision-making process is vital.

Probe the chief executive

We are signed up to the UN Principles for Responsible Investment, and we spend a lot of time looking behind the numbers at companies that can be very good at manipulating measures such as the UN Sustainable Development Goals. 

These 17 goals are a global blueprint to achieving a better future for all of us.

They address challenges related to poverty, inequality, climate change, environmental degradation, peace and justice. The aim is to achieve them all by 2030. 

I always ask the chief executive to explain their company’s sustainability aims.

It’s the simplest and most effective test I've found.

Often, you’ll see highly polished leaders suddenly look around for help.

Or, they are able to just talk about it freely (remember the bit about DNA?), and that's a really good sign. 

Accountability and independence are paramount.

Rathbone Greenbank Investments has housed our ethical investment research team for more than 20 years, and I have to send every stock idea to them for the final say.

We have two stages when choosing companies to invest in; a negative screen that knocks out things like oil, gas and armaments; and then we demand a very positive link to sustainability.

Ideas are not plucked out of the air on an emotional basis. 

Part to play

There are different approaches within the sustainable finance industry and different terminology on ESG.

But I think we have to work together as fund managers, financial advisers and investors to implement that positive change.

Arguably, asset managers haven't done enough in the past. That’s starting to change. 

Soon there'll be more resources to help financial advisers invest sustainably for clients.

The EU taxonomy on ESG is due this year, which could instigate big changes. Funds will soon have to report much more on their sustainability aims. 

It's still very early stages, and it’s a long road, and the ‘S’ is now here to stay.