Anna Murray, global head of sustainable investing at the Ontario Teachers’ Pension Plan (OTPP) in Canada, said the plan has finally come to terms with the anti-ESG sentiment that has been widespread in some investment circles.
Responsible investment has become a hot political topic in the world’s most important capital market, the United States. Last month, the US market regulator, the Securities and Exchange Commission (SEC), faced with multiple lawsuits from Republican-led state attorneys general, blocked public companies from making climate-related disclosures.
Speaking at the Fiduciary Investor Symposium at the University of Toronto across the border this week, Murray acknowledged that after spending the past few years feeling “defensive” against anti-ESG sentiment, he is now “very much welcoming of it.”
“I think this is a blessing because it has made us all focus on removing the labels. [recognising] What we’re really talking about [around sustainability] “This is a growing set of significant risks that are fundamental to our fiduciary responsibility,” she told the symposium.
“One of the challenges we face, and I would say across the industry, is around emissions intensity and our absolute focus on that as the only measure of progress.
“Obviously, this is a very important step, but I think we can all recognise that it’s probably an imperfect step and it’s retrospective.
“[I am] We look forward to further developing the discussion to include the ability to identify and seize these investment opportunities, rather than focusing solely on reducing our emissions portfolio.”
This was echoed by Hendrik Du Toit, founder and CEO of international asset management firm NinetyOne, who said ESG considerations have become an essential element of modern investing.
“[The ESG team] “These aren’t people sitting in the corner next to the compliance team. They’re actually embedded in the investment team and in the leadership of the firm,” Du Toit said.
Despite the negativity surrounding ESG, Du Toit said the field is still seeing an unprecedented level of international collaboration.
“It’s very significant that the U.S. and Chinese governments, who don’t talk much, are now completely opening up the channels for discussion on climate change. This is something that hasn’t been publicized much,” he said.
“There are some things happening that are worth celebrating.”
But the outspoken du Toit said the asset management industry had done a “pretty terrible” job of quantifying transition risks and that it would be a shame to see a world where even 1% of capital per year could not be mobilised to fund the transition.
“As an industry, we’re incredibly stupid at times,” he said. “We’ve had 10 or 5 years of literally free money, and what did we do with it? We’ve put it into technology that we don’t actually need to use.”
“As an asset manager, what we can do beyond pricing securities is mobilize capital to invest in the most important investment opportunities of our generation.
“What we’re trying to do is encourage the companies we invest in to recognise transition risks and maximise value – to come up with realistic plans to protect the value of their equity and contribute to a more liveable world. And that’s it, really.”
BNP Paribas Asset Management has committed to dedicating 50% of its C$750 billion in assets under management to 10 net-zero targets across equity and credit corporate investments and some personal assets.
Jane Ambaktshya, the company’s global head of sustainability, said the anti-ESG movement was evidence of influence.
“A lot of the backlash that we’re seeing in the market today is actually because … we’re going into areas that are uncomfortable,” she said.
“I think a lot of people are waiting for interest rates to come down so that they can spur investment in clean energy and make it more attractive.”
While pension funds and sovereign wealth funds are positioning themselves well in the private market to seize clean energy opportunities, Ambachtscheer said, “the big problem is public [market] And its performance has actually been less than stellar, with the S&P Clean Energy Index down 15.63% on an annualized total return basis over the past three years.
“A lot of people are taking note of this and pointing to it as evidence that sustainable investing has been on track for the last three or four years and is now moving in a different direction,” Ambahtsir said.
“That’s not how we think. Investing in clean technology and renewable energy is part of an overall broader and more diverse approach to thinking about the transition, and looking for the right pricing and opportunities is a key element of that.”
“On the stewardship side, last year we voted against 1,000 management resolutions because we were not happy with companies’ climate reporting.
“So we have some things that we can measure and report on annually. I think a big part of our work is helping investors understand and align with what they want to achieve in terms of net zero.”
