IFAM: How powerful is the growing force of investor interest and consumer demand being felt by the business themselves and, if so, is it driving any different habits amongst those businesses?
BCM: We’ve seen transformational change here in recent years. Investors are piling pressure on companies to articulate their sustainability strategy, to disclose better ESG data and increasingly to articulate their purpose and how it will enable them to deliver on their societal responsibilities. This has led to a sea–change in corporate disclosure and strategy around sustainability. It is now top of the agenda at board meetings and is increasingly being put directly into incentives for management such as executive remuneration targets. This pressure has moved beyond the need for policies towards a focus on actual performance and evidence.
Beyond investors, huge pressure is now being exerted by consumers, regulators and civil society. Is this pressure being felt by businesses? Yes, it absolutely is. Companies are having to face the fact that if their business model is unsustainable they are going to have to change or become defunct. Not all businesses are embracing this change, but more and more are, which is a much-needed development. One of our roles as investors is to check whether companies are ‘walking the talk’ with regards to their sustainability agenda. As well as setting out a polished, high-level strategy or signalling a change in objective, what are they actually doing on the ground to demonstrate the genuineness in their purpose, via tangible actions, performance and capital allocation? The best examples have their purpose flowing clearly right throughout the organisation and its culture.
IFAM: What do you believe will be the key factors and drivers of growth for ESG in the years ahead?
BCM: I think a continuation of these broad drivers, including regulation and societal preferences, will drive the long-term growth of ESG investing – and increasingly impact investing too.
ESG integration is now (rightly) expected as standard for all investments. Investors are no longer just seeing ESG as a risk that needs managing, but as a positive opportunity too. There is growing recognition that we can invest for positive impact – to address the challenges facing the planet and its people, while patiently pursuing financial returns.
There is also mounting recognition amid the accelerating climate and other crises that we need to rethink how the economy is set up. To address climate change and environmental degradation, we need to move towards a more circular economy, where inefficient production and consumption models give way to those where materials are reused, repurposed or recycled and where waste is can be used as a valuable resource in a closed loop system. Businesses and industries that embrace this will be well positioned. I expect this to align with a need for solutions to address the growing focus on nature and biodiversity, on which the global economy is fundamentally dependent.
As we are now in the Decade of Action to achieve the UN’s Sustainable Development Goals (SDGs) by 2030, there is an urgent imperative to address society’s greatest challenges, with sustainable and impact investors having a crucial role to play.* Guided by the SDGs, these investors can help galvanise efforts to raise impact capital and to mobilise it in a targeted, measurable way towards these solutions.*
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* For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within.
This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England and Wales. Registered Number 90776.
The value and income from the fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.
While we support the UN SDGs, we are not associated with the UN and our funds are not endorsed by them.
About Ben Constable-Maxwell
Ben Constable-Maxwell is Head of Sustainable and Impact Investing, leading M&G’s strategy on impact investing as well as covering sustainability issues such as climate change and the circular economy. He has been central to the development of ESG integration within M&G’s investment processes and has supported the development of ESG solutions for clients across asset classes. Ben plays an active industry role as a member of various sustainable and impact investment initiatives, interacting with companies, policymakers, NGOs and other investors. He is a Trustee at Firefly International youth organisation, which provides educational and mental health support for young people in conflict-affected areas in the Balkans and Middle East. Previous to joining M&G in 2003, Ben spent four years with the Equities team at Invesco Perpetual. Ben has an honours degree in Classics from the University of Newcastle-upon-Tyne.
