“I hope this year brings innovation in terms of analytics and the right tools to be able to engage more easily and make more informed investment decisions. We’re excited to step up to the challenge and believe that the managers that will be around tomorrow are those that take action on climate change today.”
The views expressed in this piece are not intended to be a source of advice or credit analysis and the information does not constitute investment advice.
Are you seeing elevated interest from BlueBay investors regarding climate change and ESG as a whole?
Definitely – there’s always been interest but things have reached a tipping point in the last 6-9 months. This isn’t necessarily surprising as 2019 was a very visible year for some of the physical impacts of climate change. There was also a clear direction of travel from politicians regarding regulation around climate change. More broadly, plastics (and their impact on biodiversity) became a headline topic for the public, leading people to take action. In tandem, social unrest and rising populism stemming from concerns about human rights have also become topical issues influencing our investors.
What can the asset management industry do to make a positive impact over the next decade?
The industry needs to be honest…recognise the problem and not bury its head in the sand. We need to take action now and at unprecedented levels.
It’s always hard to be the first one to act, but we all need to be brave. As a society, we need to consider what we value and look beyond what we’ll have to retire with and consider what kind of world we want to retire into.
Then we need to be smart. Regarding climate change, we tend to focus on the downside risks and overlook the opportunities. With the changes in capital flows, some companies will prosper and some will struggle – we need to know where the opportunities lie and be ahead of the curve to capture them.
Finally, we need to be inclusive. New ways of working within the investment industry will required different participants to work together to share the risk burden and to ignite innovation.
Are you seeing the industry make cultural changes to allow ESG-led ideas to overwrite the old ways of doing things?
It’s natural to want to carry on the way it’s always been. Increased recognition of environmental factors within the industry is great, but change has been slow so far. I hope that going into this year, and indeed the new decade, we’ll see an acceleration of this shift in thinking.
Society and other stakeholders are certainly looking for the industry to take a more active role.
Scrutiny is increasing and expectation is heightening – there’s no longer anywhere to hide. This provides a great opportunity for the industry to demonstrate its value to society.
ESG has always been a part of the BlueBay investment approach, but what are we doing to make it even more of a priority?
We consider every material risk when making an investment, including ESG factors. What’s changed more recently is how we’ve formalised the ESG process and made it more strategic. We’ve focused our efforts around three categories:
- Education – raise awareness internally and improve understanding and knowledge.
- Evaluation – consider the risks and opportunities in our investment decisions systematically.
- Engagement – to ensure we use the insights we gain to take action, both with issuers and wider stakeholders.
Which ESG investing focus areas do you see gaining prominence over the next 12-months?
We talk about having a decade to act but I see 2020 as the year which will set the tone in terms of the scale of ambition. This is why we’re facing so much scrutiny and expectation this year, in my view.
The theme of climate change will continue and will, in our view, become more political as more regulation comes through.
Beyond the environmental damage associated with climate change, we mustn’t neglect the social dimension, which requires a move to low carbon. With it, fundamental shifts in economic activities could cause people to be left behind. We need to consider human rights alongside the environment.
More broadly on the social side, we’re looking to the UN Sustainable Development Goals. These present real opportunities for governments to act and for the private sector and financial institutions to play their role.
For me, I hope this year brings innovation in terms of analytics and the right tools to be able to engage more easily and make more informed investment decisions. We’re excited to step up to the challenge and believe that the managers that will be around tomorrow are those that take action on climate change today.