The industry needs to step away from finding a single vision for ESG and should instead embrace the different philosophies that match their ambition on the issue according to a panel.
Speaking at the Professional Planner Researcher Forum, Zenith head of responsible investment and real assets Dugald Higgins said the industry has made itself too busy arguing about who has the right vision.
“All this wrangling about someone’s version of sustainability versus somebody else’s is really impeding the whole process,” Higgins said in a session chaired by T. Rowe Price ANZ head of consultants Cassandra Crowe.
“If people are transparent and clear about how they view it and how they incorporate it, then that is the easiest way to stop getting into an argument.
“If people don’t agree with your interpretation that’s fine, they’re perfectly entitled to do that, but where there’s unwillingness to understand how the other person is doing it is where you get stuck.”
Kenneth Robertson, Robeco sustainable investing client portfolio manager, added that it’s instead more valuable to find a manager who has a matching definition of sustainability.
“You need those minimums standards that help make those decisions and help you avoid doing significant harm,” Robertson said.
Higgins added: “To bookend that you need to understand what success looks like”.
Greenwashing
Research from Investment Trends found responsible investing practices doubled in importance for financial advisers in 2021.
As more flows come into ESG the more pressure is on funds to deliver ESG results without compromising performance, which can often lead to cutting corners in implementing adequate screening filters.
Deanne Baker, Lonsec Investment Solutions senior portfolio manager for sustainability, said greenwashing gets talked about a lot for companies, but certainly applies to fund managers.
“We have a lot of slick marketing departments in a lot of fund managers out there,” Baker said. “Given the money is flowing into this space, there is a lot of scope for that kind of behaviour.”
Baker said smart advisers should look for fund managers that are genuinely advocating for change and committed to making a tangible difference with ESG.
“They should be looking for not just a manager that incorporates ESG investment processes, but what is their level of proxy voting on these issues,” Baker said.
Steve Monnier, BlackRock Australasia sustainability specialist for, said stewardship has become a critical part of BlackRock’s investment process.
“Others might call that active ownership, but it’s all around ESG engagement and voting at the annual general meeting,” Monnier said. “The work that team does is critically important to understanding where companies are in managing risk and opportunities.”
‘E’ is here to stay
At the end of 2020, BlackRock surveyed 400 clients globally which found they intended to double their sustainable assets over the next five years.
Monnier said this allocation would go from 17 to 18 per cent to potentially up to 40 per cent.
“The ‘E’ is very much here to stay,” Monnier said. “What we’ve seen over the pandemic during the last couple of years is the rise of social issues.
“There’s been a greater focus on everything from employee welfare, human rights, to supply chain resilience.”
Fiona Reynolds, Conexus Financial chief executive, said activist shareholding voting will continue to escalate.
“We started to see that last year when investors engaged with Exxon around their climate policies,” Reynolds said.
“Exxon was not moving at all. Shareholders decided to vote on board members that would be able to do more about moving the company on the issue.”
