Stewardship & ESG Outlook 2020

Head of ESG and Stewardship David Sheasby outlines the key sustainability issues for investors in 2020

3 December 2019

What’s the market not seeing?

Food for thought

When we talk about climate change, fossil fuel industries and transportation often tend to dominate the headlines. The areas of food production and consumption, by contrast, get less far less air time. But I believe that is about to change.

There are two key issues that are likely to surface as points of major concern. The first is food waste. An estimated 30% of food produced is wasted along the value chain – this creates unnecessary use of resources but also unnecessary emissions along the way. The second element is diet. Animal proteins are not only one of the least efficient ways to use the planet’s precious resources to produce calories, but livestock systems are also estimated to be responsible for more than 15% of green house gas (GHG) emissions - that’s more than is created by the entire transport sector globally. As the middle class continues to grow in emerging markets and dietary demands change, this problem is only set to grow.

To keep the Paris Agreement within reach there will almost certainly be a need to address both of these issues as quickly as possible. Which is why I think this is going to become an increasing focus for both consumers but also for governments alike from now on.

Food production and waste will be an increasing focus for both consumers but also for governments.

What’s your focus in 2020?

Stewardship and opportunities

There are two key areas of focus for Martin Currie. Firstly, it’s about how we continue to evolve our stewardship activities. Stewardship is already embedded in the work that we do, so we are already in a great position. However, there is more that we can do in measuring and reporting on the impact outcomes of our stewardship work. This is also aligned with the changes we have seen in the recent revisions to the UK Stewardship Code, which sets a new high bar for stewardship globally.

The second area, which is related to this, is the growing significance of the UN Sustainable Development Goals (SDGs). These provide a great lens through which to view the sustainability of the companies that we invest in, but they also present opportunities for companies across many sectors. We are already using these goals to understand how our engagement activities are aligned with the SDGs but we will also continue to embed this into our analysis and reporting as we go forward.

The UN Sustainable Development Goals (SDGs) present opportunities for companies across many sectors.

What are the key ESG themes in 2020?

Climate change stays front and centre

I think two key areas will dominate the ESG agenda in 2020. Climate change is going to continue to be front and centre as we go into 2020. This theme will be particularly pertinent in the UK. With COP26 being hosted in Glasgow next December and with the UK being the first country to have legislated a net-zero target, there will be a huge effort to showcase leadership in the run up to this.

Climate change

For investors such as ourselves, climate change will clearly remain a key focus and this will continue to play an important role in our ongoing engagement with companies. Companies themselves are also increasingly building out their understanding of the effects of climate change and reporting back on these.

The second major theme will be regulation. The pace of regulatory change has increased dramatically over the last couple of years and this has focused more and more on the asset management industry.

These changes reflect the changing demands of end consumers, but also the evolving role that the asset management is seen to play in delivering a sustainable economy and financial system. It will provide an opportunity for our industry to win back the trust of clients, and we believe that stewardship – which is central to our approach to investment – is going to lie at the heart of this.

2019 Outlooks

2020 Vision

Our portfolio managers look at what 2020 has in store for investors. What's the market not seeing?

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