IFAM: You mentioned the new sustainable strategies earlier. Could you tell us more about these?
JW: Yes, they’ve been an important development for us. We’ve launched two multi-asset sustainable strategies – Sustainable Balanced and Sustainable Growth – on the abrdn (previously Standard Life) and Aviva platforms. As the name suggests, these are sustainability focused and managed in line with the Investec philosophy as an ESG-integrated fund manager.
ESG has formed part of our core philosophy within fund selection for a number of years.
When it comes to the due diligence of our funds, we operate what we call our ‘APPROVED’ process. It’s an acronym. I won’t go into it in detail here, however the ‘E’ within approved stands for ‘ESG Integrated’ which shows its importance.
In practice, we do three things to test the ESG credentials of each fund that we invest in. There’s an annual quality review, which is standardised due diligence. This looks at how much ESG is integrated in each of these fund management firms and tracks their progress over time.
Secondly, we conduct a thorough due diligence analysis consisting of a series of qualitative and quantitative judgements. The things that we’re looking for from a qualitative perspective include whether they have particular resources which are dedicated to satisfying ESG credentials. We’re looking for hard evidence and how that is incorporated into what they do. We also use a third party called Sustainalytics so that we can do a deep dive into the fund managers’ underlying portfolios from a sustainability angle and can therefore corroborate or question any evidence that we get.
For each different asset class we check all the holdings against the UNPRI reporting structure too. This gives us an additional filter to check on the accuracy of their real sustainability position as we can corroborate that with the standards that are out there in the industry.
Finally, we meet the fund managers face to face. This allows us to back up our research processes with human engagement and check the quality of what goes behind the scenes for ourselves. It’s a vital part of the process.
IFAM: Are the costs of the sustainable solutions any different to the core strategies?
JW: The two sustainable strategies have slightly higher charges than the core portfolios, being cost capped at 0.75%. That’s just because if we’d stayed within the cap as applied to the core range, it would have negatively impacted our ability to access some higher quality ESG managers.
Reassuringly, it’s exactly the same process though – this total won’t go beyond 0.75%.
IFAM: What does ‘sustainable investing’ mean to Investec?
JW: Some fund managers just undertake some basic ethical screening – perhaps screening out ‘sin’ industries such as tobacco – which may go far enough for them. We understand that need to exclude of course, however we’d like to see an industry which goes beyond this.
For us, we’re looking to invest in long term funds which will have a net benefit to society and lead on environmental, social and governance management issues. We think that looking at these issues is a way of generating consistent long term returns.
At Investec, our new Chief Investment Officer is Stacey Parrinder-Johnson. Her previous position was leading on ESG in our research proposition. I believe that the fact that she has become our new CIO reflects how she has been such a big driving force in the business and is fully behind our ESG focus. She also chairs our new joint ESG committee so we’re well placed to ensure that we have an even greater ESG proposition going forward.
Qualifications are also really important here. In particular, all those on all our investment selection committees are either already ESG CFA qualified or are working towards it.
It’s a cultural focus within our business now and one which I think will ensure that we’re using our strengths in the best possible way for future success. That’s not only to ensure we can deliver optimum investment returns for our clients over the long term but also that we can be sure that our other underlying goal of delivering on our purpose to create enduring worth – living in, not off, society.
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About Jon Walker
Jon is an Investment Director, having joined Investec Wealth & Investment in 2006. Jon has a degree in Accountancy and Finance and is a Chartered Wealth Manager. Jon heads the Liverpool Discretionary Desk and runs a variety of portfolios from private clients, trusts, pensions and charities. Jon also manages the MPS and Funds service.
