ESG InvestingAug 17 2020

Campaign launched to nurture interest in ESG investing

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Campaign launched to nurture interest in ESG investing

The growing evidence weighted in favour of ESG, particularly in light of the fossil fuel crisis, has led to interest in how to make investing in green companies easier and more transparent for advised clients.

The recent launch of the Make My Money Matter campaign aims to encourage the public and the finance sector to work together towards realising the green agenda of investing in sustainable companies.

Headed up by Comic Relief co-founder Richard Curtis and UN special envoy for climate action and finance Mark Carney, the campaign is a drive to inspire the public to be part of a more ethical global future through pensions investment.

Key Points

  • Richard Curtis and Mark Carney are campaigning to encourage more interest in ESG investing
  • People may not realise their pension investments go against their principles
  • Nest is investing in companies that have a sustainable future

Mr Curtis and Mr Carney, together with other business and third-sector leaders backing the campaign, see the £3tn of pension investments held nationally in the UK as a huge opportunity for a collective push to save the environment and create better social conditions for people around the world.

Begins with the personal

Mr Curtis says popular protest movements like Black Lives Matter and Me Too show “people are prepared to change their behaviours to change the world”.

It is vital, he adds, to recognise that while law and regulation have a role to play in sustainable investing, real change “starts with the personal”.

He cites a conversation with Dr Bronwyn King, an oncologist saving lives from cancer. Dr King had a meeting with her pensions provider and found out her pension was funding tobacco companies.

Mr Curtis says this is a prime example of an individual’s pensions being invested in companies that directly oppose their values.

“We need to raise public awareness,” Mr Curtis says. “The public want their money invested in sustainable funds – affordable healthcare, affordable homes, vaccines, clean energy. Here’s a massive pot of money. What’s standing in the way?”

Role of industry

While Mr Curtis, a screenwriter responsible for popular films such as Love Actually, Notting Hill and Bridget Jones’s Diary, values the personal, public-led drive for the change reform boils down to, Mr Carney builds on this with his perspective on the role of business and industry.

Mr Carney says: “Finance lost its way in the run up to and during the financial crisis... We need finance to go back to being part of the solution; back to helping society achieve what it wants... Finance is meant to serve society. It is not an end in itself; it is a means to an end.”

The former Bank of England governor describes not only how finance needs to serve public need, but also says that “when business gets behind what society wants, it can do extraordinary things”. He identifies the “decisive role” the finance sector has to play in achieving a better global future and net zero, and what is “the enormous opportunity to act now”.

The London Institute for Banking & Finance is backing the green finance education charter that has recently been launched for professionals in the finance industry.

John Somerville, head of regulatory relationships at LIBF, also believes in the role of business and says: “Every company should be thinking about the impact their business is having... That means thinking about every part of the sustainability puzzle, including diversity and inclusion, health and wellbeing and how to minimise pollution and waste.”

Will of the public

Helen Dean of Nest supports Mr Carney and Mr Somerville’s view of the part played by business, but adds the reminder that the foundation stone of good ethical business is public will.

The chief executive of Nest Corporation – a not-for-profit pensions trust whose members make up a quarter of the UK’s employee population – Ms Dean says membership surveys demonstrate there is a strong desire for funds selected to conform to ESG principles.

She says: “Member surveys call on Nest to sort out society, the economy and the environment because they are some of the factors that have caused the problem of Covid-19 and made it so hard to deal with.”

Questions concerning any “trade-off” between returns and investing in line with values is a “myth”, a “false choice”, she says. 

“Nest is a long-term investor that is investing in companies that are going to survive, thrive and be sustainable in the long term in order to achieve returns for our members. This is part of managing risk,” she adds.

Russell Picot, chairman of the trustee board of HSBC Bank (UK) Pension Fund, feels the same way.

He says the system was “previously optimised for efficiency and not resilience”, which he notes opened investments to a huge amount of risk. This is reflected by Mr Carney, who quotes BlackRock’s chief executive, Larry Fink, saying: “Climate risk is investment risk.”

But advisers can help with understanding ESG and communicating the importance of investing. Pensions specialist Henry Tapper talks about the role of IFAs in individual stewardship. Mr Tapper says IFAs are important to the fund manager or platform manager. Therefore, if the IFA can “bring their influence to bear on a situation then an IFA can become a proxy for quite a few of their clients.”

Likewise, IFAs are able to “vote with their feet” and move their clients’ money to another fund. “At the stewardship level, at the product level, and at the fund investment level, IFAs have a great story to tell”, says Mr Tapper. “But most importantly too, IFAs have a capacity to communicate to their clients that their clients can make a difference.”

Putting on the pressure

To better manage risk, Ms Dean and Mr Picot both also identify a moral imperative and responsibility of pension companies to respond to members’ concerns and use their collaborative power to focus pressure on fund managers into sustainable investing.

“If members of pension schemes ask their trustees ‘what are you doing with my money?’, trustees will feel under pressure and will need to ask fund managers to get information about investment from the companies and will pressure the companies to declare this information,” Mr Picot says. “It is about building pressure through the system.”

Ms Dean cites annual general meetings as one vehicle through which Nest has built momentum to shape the sustainability agenda.

As a result, Nest has influenced fair executive pay, living wage, and diversity on boards. For example, Nest and other investors have succeeded in urging a High Street bank to move towards a net zero carbon footprint. 

While pension trustees and fund managers can put pressure on companies to make sustainable investments, IFAs have a role to play too.

As intermediaries, IFAs have influence in directing clients’ concerns toward pressuring fund managers into demanding greater ESG accountability from companies.

Mr Somerville says: “For IFAs, it means looking at where clients’ funds are invested. Covid-19 has focused many clients’ minds on green issues and the finance sector has a critical role to play in helping humanity address the challenges presented by climate change.”

A huge part of helping intermediaries and clients understand whether a company is investing responsibly is disclosure.

Current legislation, and legislation going through parliament right now, will aid “accurate and comprehensive information about how a pension is invested”, for example, temperature rise disclosure.

But Mr Carney says then there is the component of “judgment”, which is how an intermediary, fund manager or client uses and acts on that information.

Mr Carney says: “As people move their money or change their money and express their preferences around their money, that funds new companies and new solutions, that – whether in food or energy industry – are consistent with what people want.

“That’s what creates innovation and that’s what creates jobs of the future and the growth of the future.”

Anita Boniface is a freelance journalist