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Sustainable investing in the aftermath of COP26 and the Covid-19 pandemic

The need for advisers, planners and paraplanners to access genuine and accurate information about sustainable investing has never been greater. With growing pressure from clients who want to ensure that their investment portfolio extends into broader objectives of sustainability, advisers’ need reliable information upon which to base their recommendations. The latest IFA Magazine ESG webinar brought critical thinking on key ESG issues, the challenges and opportunities. Here we bring you a brief overview of just some of the conversations.

Today, the ESG investment space is becoming increasingly crowded. For wealth managers, advisers, planners and paraplanners it means there are so many issues to consider when evaluating sustainable asset allocation and portfolio construction models as well as individual investments and funds.

Advisers and planners also need to be in full possession of the right information about sustainable investments – and the markets in which they invest – so that they can advise clients effectively on suitable sustainable solutions. So, how can you cut through the marketing noise to ensure that the funds and companies in which your clients’ precious assets will be invested, really do pass the “Ronseal” test – that it “does what it says on the tin”?

These crucial considerations were all front and centre during IFA Magazine’s powerful ESG webinar which took place on Thursday, 24 February 2022. It offered an in-depth and free-flowing conversation with three experts in the ESG and sustainable investing space. All three shared their insight, experience and knowledge to great effect. As you can imagine, there were strong views aired not only about matters of sustainability but also about the challenges, risks – including transition risks – and other key issues involved in the detail of ESG investing.

Expert opinion

We’re hugely grateful to James Alexander, Chief Executive at UKSIF (UK Sustainable Investment and Finance Association) for chairing the discussion so ably, and to Jonathon Spanos, Head of Venture Capital Investment at Vala Capital and last but not least, Randeep Somel, Fund Manager at M&G Investments. Both M&G Investments and Vala Capital are members of UKSIF.

Our panellists discussed a broad range of topics, including many relevant company examples of how and why certain businesses are at the forefront of sustainability – and some that aren’t!!

The thorny subject of greenwashing was one such topic, and the question was asked whether it is indeed a big problem in sustainable investing. From the discussions, it is clear that there are steps which asset managers can take in order to try and overcome it but it remains a key issue.

Much of the challenge around greenwashing relates to difficulties in getting sound sustainability data, which is an enormous challenge for ESG investors and really matters.

As the panel highlighted with examples looking at ESG more broadly, questions about data do not just relate to the climate change and emissions arenas. Somel reflected on some practical examples to highlight the situation with regards to getting good data around social policy – an ESG area which is often overlooked. His argument was that when considering the different elements within ESG that “social policy is the most difficult one at this stage; the one that requires the most work. It is happening but it’s still at a much earlier stage.”

Somel didn’t hold back on the positive news though, summarising: “there is no getting away from this drive to sustainability now. There is clearly going to be a delineation between the companies and the products that you invest in. There will be very clear winners and there will be very clear losers. You do not want to be on the wrong side of that line going forward.”

A pandemic response?

As to whether or not the Covid-19 pandemic has exacerbated the move towards sustainable investing, as James Alexander succinctly put it, where we are moving to now is “instead of rating how the changes in the world are going to impact upon a company, we’re going to start looking much more closely at how a company is impacting on the world both positively and negatively”. Both Somel and Spanos were fully on board with this and shared their own experiences of how they work to achieve just this outcome.

And what about COP26?

Has last year’s UN conference in Glasgow shifted the gears of sustainable investing? Somel believes that summits like COP 26 are “absolutely brilliant”. He was quite outspoken here reminding us that “there are always naysayers on both sides at events like this, some believing such events shouldn’t exist and are ridiculous right through to the environmentalists who despair that nothing will ever get done and the ambitions are too low.” He also pointed out that over 100 countries were involved and they did agree to start setting intermediate goals as well as goals for 2050, has to be seen as powerful drivers of positive change.

Regulatory reflections

Panellists also discussed the regulatory landscape, particularly in the UK, and what the impact of forthcoming changes via the sustainability disclosure requirements, or of these companies to engage directly with leaders from Governments and corporations and to help to shape the future in a more sustainable way.

Future vison

Somel recalled comments from the former Governor of the Bank of England, and UN special envoy for climate action, Mark Carney. Carney famously called out to fund managers to invest in private sector initiatives to drive sustainability as probably “the greatest commercial opportunity of our time” to help companies to transition to a net zero future, for those who choose to take part in it of course. As Somel summed up, “yes, there’ll be setbacks and volatility but there’s no getting away from this move to sustainability now.”

Catch up with the full webinar details here

If you tuned in, thank you, we hope you found it interesting and valuable. If you didn’t, you can catch up now on the full conversation by tuning in to the recording.

Catch up on the conversation here.

 


 

Chair: James Alexander, Chief Executive at UKSIF

James has a background in international climate finance and infrastructure finance as well as many years’ experience in leadership roles in membership organisations. Most recently, James supported global megacities to overcome the substantial barriers to financing climate action as Director of the City Finance Programme at the C40 Cities Climate Leadership Group and Head of the C40 Cities Finance Facility – a project preparation facility he developed, now supporting cities across the world to structure nearly a billion dollars of sustainable infrastructure transactions.

 

Jonathan Spanos, Head of Venture Investment at Vala Capital

Jonathon is responsible for Vala’s portfolio of venture capital investment activities across all funds. Jonathon has extensive experience in capital raising, investment advisory and venture building, having previously worked at Virgin StartUp, part of Sir Richard Branson’s Family Office. During his time at Virgin, Jonathon launched a range of innovation accelerators (combined £50m fund) and investment programmes supporting >100 scale-ups to receive >£25m in venture funding. Prior to Virgin, Jonathon was part of the founding team that created Allbirds, a leading brand in sustainable fashion and innovative eco-material science.

 

Randeep Somel, Fund Manager at M&G Investments

Randeep joined M&G in 2005 as a fund managers’ assistant on the equities team. At different stages between 2013 and 2019 he was fund manager or deputy manager of the Global Themes, Managed Growth, Global Recovery, Global Select, Pan European Select and Positive Impact strategies. In November 2020, he became manager of M&G’s newly-launched Climate Solution strategy. Prior to joining M&G, Randeep worked for State Street in a fund accounting role. He graduated from Birmingham University with a degree in economics in 2003. Randeep has the IMC and is a CFA charter holder.

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