ESG and stewardship in the aftermath of COVID-19
Kim Catechis and David Sheasby, Head of Stewardship and ESG, discuss how COVID-19 has accelerated key trends in the ESG and Stewardship space.
Please note that the analysis of Environmental, Social and Governance (ESG) factors form an important part of the investment process and helps inform investment decisions, although a strategy may not necessarily target particular sustainability outcomes.
The severe recession has resulted in a strong reduction in carbon emissions, but this suggests that there is a lot of work that still has to be done to achieve the climate neutrality by 2050.
Kim: Hello again, and welcome to another edition of the AFTERMATH. Today we are going to go somewhere completely different, we are looking at the question of Stewardship and ESG. To help me parse through this topic, I have David Sheasby, who is Head of Stewardship and ESG at Martin Currie.
David Really good to see you.
David: Really good to see you also Kim, and may I compliment you on the shirt, fantastic.
Kim: That's so kind of you David. Now let’s just dive in here. The first question I guess is a reflection really, that is the reflection I make is that COVID-19 so far, has proved to be an accelerant of trends that were arguably already on course, in every aspect almost of society and the economy worldwide. What would be the big takeaways for you in the space of ESG and Stewardship?
David: So, I think if we think about what’s kind of happened over the course over the last few months, I think there has been a real change in terms of focus for how investors and asset owners are thinking about companies, and to an extent their behaviours. I think what’s really been in evidence over the course of the crisis so far, is that companies have been able to demonstrate the extent in which they are really acting as responsible business owners, and in particular how they are treating their employees, what facilities they have made available and how they have acted. And so, if anything I think, if we think about E S & G, I think the S has really come to the fore over the last few months.
Kim: Tell me, are there any countries or regions that are showing particularly strong policy signals at this time?
David: Well, I think then you can potentially turn to one of the other aspects of ESG. So as I mentioned, the S has really come to the fore in terms of how companies behave. But actually what people have been maybe a bit concerned about is there has been a lot of sight of clearly a systematic issue, which is climate change. So actually what we have seen is a re-emphasis in some areas on the E, so actually, for example, particularly in somewhere like Europe. So in Europe we have seen the Green Deal, which has been announced, and also the stimulus package more broadly, which both have elements of support for climate change initiatives. And the EU has really stood out in terms of wanting to stimulate the economy but at the same time set out its ambitions to try and achieve the goal of net 0 by 2050.
Kim: That all makes sense, David. Now, this morning, I came across a number, around US$21 billion, which is the net inflows in the US only for the first half of this year into funds that are labelled ESG.* What would you say to an investor, be they an individual investor or an asset owner who really wants to maximise the impact of their investment?
David: So, I think it's thinking about what you want to achieve, and what particularly you're interested in and targeting. One framework that I think is very helpful in terms of thinking about the impact of investments as we look out over the next 10 years is the UN sustainable development goals. So, clearly those are priorities for governments, they will also form part of the policy as we look forward, and I think in a way that’s going to be an interesting way for us as investors and for the asset owners to frame the impact. And one piece of work that we are doing at the moment is looking at how we map the investments that we are making on behalf of clients to those sustainable development goals and I think that’s a really important development over the next 10 years.
Kim: Okay, that all make sense David. Now, I can’t let you go without asking you to comment on Martin Currie's recent award of A+ from the PRI. Give us a sound bite.
David: We are very pleased, it is 4 years in a row that we have achieved the top A+ ratings across the 3 pillars that we are assessed on, and it's really down, I think, to hard work across the teams so, from me a thank you to the team as well, that’s some great work.
Kim: Well, thank you for that David, it’s been very useful and very helpful at understanding the picture up to date.
Thank you all for tuning in and please come back again next week, we will have something completely different.
* Source: Morningstar Direct. Data as of 30/6/20. Includes ESG Integration, Impact, and Sustainable Sector funds as defined in Sustainable Funds US Landscape Report, 2018. Includes funds that have been liquidated; does not include fund of funds.
Regulatory information and risk warnings
Past performance is not a guide to future returns
This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’). It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
The opinions contained in this recording are those of the named manager. They may not necessarily represent the views of other Martin Currie managers, strategies or funds. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
The analysis of Environmental, Social and Governance (ESG) factors form an important part of the investment process and helps inform investment decisions. A strategy does not necessarily target particular sustainability outcomes.
The information contained has been complied with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this recording for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.
The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable.
Tel: 44 (0) 131 229 5252 Fax: 44 (0) 131 228 5959 Authorised and regulated by the Financial Conduct Authority. Please note that calls to the above number may be recorded.
For wholesale investors in Australia: This information is issued and approved by Martin Currie Investment Management Limited ('MCIM'). It does not constitute investment advice. Any distribution of this material in Australia is by Martin Currie Australia Limited ('MCA'). Martin Currie Australia is a division of Legg Mason Asset Management Australia Limited (ABN 76 004 835 849). Legg Mason Asset Management Australia Limited holds an Australian Financial Services Licence (AFSL No. AFSL240827) issued pursuant to the Corporations Act 2001.
For institutional investors in the USA: The information contained within this presentation is for Institutional Investors only who meet the definition of Accredited Investor as defined in Rule 501 of the United States Securities Act of 1933, as amended (‘The 1933 Act’) and the definition of Qualified Purchasers as defined in section 2 (a) (51) (A) of the United States Investment Company Act of 1940, as amended (‘the 1940 Act’). It is not for intended for use by members of the general public.