It is going to become even more important for asset managers not to exclude certain sectors from their portfolios in coming years, the chief sustainability officer at Ninety One has said.
Nazmeera Moola told FTAdviser that the slowing investment into fossil fuels specifically shows the importance of asset managers engaging with “dirty” industries, but the industry still has a data problem.
We are going to see a major supply squeeze in fossil fuels over the course of the next three years because demand is not falling, she said, and yet supply has started to drop as there is less investment coming through.
“Prices are going to be elevated, and you want the control of those cash flows to be in the hands of responsible owners."
It would be wrong to assume any of us have all the answers.Tom NelsonIf these stocks end up in private hands, the incentive is going to be just to maximise production, Moola said, rather than owned by those who support the transition to net zero emissions.
“The easy way to implement sustainability is to exclude and simply to say, ‘we don’t invest in those things’.”
She agreed it is more expensive and labour intensive to set up engagement strategies with firms to encourage them to develop transition plans, but Moola echoed Ninety One’s chief executive, Hendrik du Toit.
Last year, he criticised purity practises, saying they were not helping to fix the climate crisis and threatened to exacerbate an existing problem.
At the time, he said: “By myopically focussing on 'portfolio purity' and picking and choosing investments that make them look green without having to advocate for real-world carbon reduction, [investors] aren’t effecting the kind of change needed to tackle the climate crisis."
Moola took up the role of chief sustainability officer at Investec’s former asset manager in November last year, after the group’s head of sustainable investment left to join Newton Investment Management.
She is responsible for overseeing the firm’s sustainability initiatives, and was previously deputy managing director and head of South African investments at the firm.
Data is still a problem
In September last year the firm announced it has teamed up with Imperial College to produce a series of climate risk programmes for its employees.
The programmes will educate Ninety One’s employees on climate-related risks and opportunities, part of which will look into whether climate risks can be priced, and how this can be priced into portfolios.
Tom Nelson, co-head of thematic equity at Ninety One, said the initiative was the result of the firm's desire to pursue ‘sustainability with substance’ and holding itself to account on these issues.
He said: “It would be wrong to assume any of us have all the answers. We want to work with the minds that can sharpen our thinking."
However, the quality and quantity of data in regards to ESG factors in firms is still an issue, Moola said.
Particularly if you’re setting targets at portfolio or firm-wide levels for carbon intensity reduction, she said, the data moves around.
The methodologies change and get updated, particularly with regard to scope three emissions, which are those emitted by a group's supply chain, not companies that it directly owns or controls.
Clients are now asking for for more data on not just carbon emissions, she added.
“Requests have escalated quite dramatically over the course of the last two years, and [the requests have] diversified.”
Previously, investors were primarily concerned with carbon reporting, but now they know that Ninety One is engaging with firms, they want to see engagement reports, diversity data on management teams, and even biodiversity data.
“You’re starting to see the requests broaden…but the data is spotty.”
Regulations incoming
Ninety One is “broadly supportive” of the UK’s incoming sustainability labelling disclosures, Moola said, adding these provide a bit more flexibility than the EU's Sustainable Finance Disclosure Regulation.
This regulation is essential, she said, to give investors comfort that the impact end of disclosure requirements has tangible effect.
“There is a real fear right now that there is lip service being paid,” she said.
“I think the disclosure is really important, but at the same time, ensuring that the drive towards sustainable investing has the intended consequence is equally important.”
Because if we create fantastic disclosures, she said, we might know exactly what we are buying, but the process behind that buying might not create the real world impact.
“Then what's the point?”
sally.hickey@ft.com
