ESG roundup: Redington identifies engagement evidence shortfalls

first_imgThe firm interviewed 104 managers from across the globe, representing over $10trn (€8.4trn) in combined assets under management, on a vast spectrum of areas relating to ESG.Redington is one of 12 UK investment consultancies that, viewing themselves as a critcal link between asset managers and asset owners, recently banded together to form a group seeking to improve sustainable investment practices across the investment industry.Ex-AP4’s Erlandsson’s Anthropocene Fixed Income Institute officially liveThe Anthropocene Fixed Income Institute (AFII), founded by Ulf Erlandsson, a former portfolio manager at Swedish buffer fund AP4, today announced its official launch.Supported by the Growald Family Fund, a New York-based venture philanthropy fund investing in the rapid transition to a clean energy future, AFII is premised on the view that fixed income markets, despite their size and crucial role for providing finance, are severely lagging in terms of climate change mitigation.Its mission is ‘to monitor, advocate for and influence the impact of fixed income markets in the age of human induced-climate change”.Erlandsoon was one of the pioneers in the green bond market, setting up AP4’s green bond portfolio while he was at the Swedish buffer fund, from 2009 to 2017. He left AP4 to move to Granit Funds, but left there after just over a year.In addition to being founder and executive chair of AFII, he has recently been appointed fellow on the investment advisory board of impact-focussed wealth manager Tribe Capital.Although AFII only announced its official launch today, Erlandsson has been working on its set-up since the beginning of July and has already published pieces of work under the AFII name.“I have been working on the AFII setup since beginning of July, but it has taken until now to get some of the formalities and strategy in place,” he told IPE. “There’s been a couple of really important topics to write about, so haven’t been able to be quiet in the run-up.”One of those topics is the Carmichael coal mine under construction in Australia, with Erlandsson publishing research investigating the fixed income funding flow for the project, down to individual bond ISIN codes and global investor holdings of the bonds.The AFII is advocating a reversal of that capital flow, which would affect bond prices, the project’s underlying cost-of-capital “and hundreds of millions – even billions – of tonnes of future CO2 emissions”.According to AFII’s website, it is building out the organisation and “will update with team details accordingly”.BMO points to ‘fundamental’ engagement shiftStewardship will increasingly be seen as being about investors’ responsibilities for shaping the market and the economy as a whole rather than just about the relationship with individual companies, according to BMO Global Asset Management.The asset manager outlined the expectation, which is also an ask, in a report setting out its track record on engagement over the past 20 years.It said it was predicting that collaborative engagement initiatives, which “came of age” in the 2010s, would increase as work began with a wider pool of stakeholders to create meaningful change.Kristi Mitchem, CEO at BMO GAM, said: “For investors to address systemic challenges, such as climate change, there will need to be a sharper focus than in the past on public policy, widening engagement beyond the company level to build relationships with new stakeholders, including NGOs and academic experts.“A collaborative approach between investors is key to making this a success, both to muster the resources to make these changes and to present a unified voice to increase influence.”BMO GAM said that, on average, 20% of its engagement activities each year were through collaborative initiatives, such as Climate Action 100+, Farm Animal Investment Risk and Return, and the Workforce Disclosure Initiative.Around three-quarters (72%) of BMO GAM’s current engagement was now linked to the Sustainable Development Goals, with the remaining 28% focussed on corporate governance, it said.Looking for IPE’s latest magazine? Read the digital edition here. More than a third of asset managers surveyed by Redington were unable to provide an example of a climate change-related engagement effort, according to the consultancy.It also highlighted that fewer than two-thirds had an engagement policy on environmental, social and corporate governance (ESG) matters, and that 60% of respondents could provide an example of when climate-related risks and/or opportunities had influenced buying or selling decisions despite 76% saying they considered these factors.Nick Samuels, head of manager research at Redington, said: “We would expect all our managers, regardless of asset class, to have at least one, if not several, examples of climate change related engagements with their portfolio companies.“Managers who thoroughly analyse – and take action on – risks are crucial to driving progress so, moving forward, we strongly hope to see this number increasing.”last_img

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