The ESG journey: public honesty for a profitable future
Citywealth asked Amy Blackwell to give an overview on the current situation of ESG investments and programmes, not forgetting about the impact of climate change and greenwashing, focusing on the relationship between investors and advisers.
Citywealth asked Amy Blackwell, Partner and Impact Adviser at Acorn Capital Advisers (who features in Citywealth’s Top 10 Sustainability Champions 2022), to give an overview on the current situation involving ESG investments and programmes, not forgetting about the impact of climate change and greenwashing, focusing on the relationship between investors and advisers.
In your experience, what ESG programmes are delivering results?
ESG programmes are most effective when companies are driven by the belief that adopting these operational goals will help their business and culture be more resilient, sustainable, profitable and purpose driven. If businesses go into the ESG journey seeing it as a burden or box ticking, then it never becomes part of the culture and permeates its ethos. Companies need to believe that these choices matter.
How do ESG investments deliver social impact and concrete solutions?
ESG investments can deliver better diversity equity and inclusion. Employees, stakeholders and supply chains can be purpose driven and fairly treated while giving respect to the environment in which they operate. Adopting best in class governance can give companies better successions, management policies and work place culture. Companies that focus on the wellbeing of their employees and supply chains build greater loyalty, productivity and have better retention. These businesses are more resilient and can be less volatile while generating values-led profits.
Is climate change the main issue?
No. The E is more developed and the data can be easier to measure at times. It is not the most important part, though. However the Social data can reveal interesting data about how the company operates and its long term viability. The ESG metrics come together as operational risk mitigation tools which can strengthen a company as it looks toward a profitable future.
New programmes are revealing problems in ESG offerings. What reputational problems do you envisage for the industry?
The fear of failure and the public impact can lead to paralysis. This is not easy to achieve and firms/people will make mistakes. The most important thing is to be publicly honest. Admit what didn’t work and share plans for how that will be managed or mitigated in the future. The worst thing firms can do is to be dishonest with the market. Investors expect companies to apply the lens to themselves honestly.
How does ‘greenwashing’ impact ESG investments?
It spreads fear and suspicion. This is where good advice and due diligence is imperative. Great things are happening in the ESG and impact space and there are frameworks for measuring these data points accurately. There is no excuse for being lazy. Invest the appropriate time and give this the attention it deserves and the commitment investors want to see.
Do private client investment managers need new monitoring services to prevent investments into companies who are greenwashing?
The basis is trust in your investment managers. They should be able to evidence their process, method, analysis tools, examples of active engagement with investee companies and be able to divest if they lose confidence. The firms often use their own tools to track and research companies alongside data feeds. They should share that information with you as part of your relationship.
Do private clients need to find a topic related to ESG and select funds accordingly or should they rely on third party help, like a lawyer or investment manager?
That really depends on the knowledge and experience of the investor. Advisers can help by knowing the questions to ask, knowing what good and great look like and have the skills to analyse the process being used by the investment manager. It’s a communication and trust issue. It should also be transparent.
Are there any good resources for clients who want to invest in ESG?
There is a lot of thought leadership coming from all over. I would suggest that investors look at multiple sources and not just reports from investment managers whose materials can sometimes be more marketing focused and less educational in intent. Advisers can help suggest reports that would be appropriate for the knowledge and experience level of their clients.
What should be expect for the future?
In the next 5 years I think people will be focussed on impact investing and ESG will have been absorbed into the general investment research into companies. There will be an expectation that well run sustainable and profitable companies will all be tracking and reporting on their ESG metrics as part of good business practice.