Recently we attended the three-day PRI in Person Conference in Berlin, the largest global conference on responsible investment (RI). The event was a sell-out, with 950 attendees and a waiting list running to the hundreds. Asset owners, investment managers and service providers were all well represented. This was a significant increase on previous years, with more senior decision-makers present and a very high quality of speakers – in our view a clear indication of the ever-growing importance of this area.

Climate change persists as the most significant topic, and the conference featured a number of seminars and discussions on this theme. Asset owners continue to have diverging views on how to approach the subject, but appear to be increasingly pushing their investment managers to integrate climate-related considerations into their stock-selection decisions and portfolio construction.

The most progressive and thought-provoking speech on climate change came from Christiana Figueres, who led the COP 21 Paris climate change negotiations. In a speech which tackled a wide range of issues, she challenged large asset owners and managers to invest 1% of their total assets in clean energy and technology by 2020 in order to drive an energy transition.

On our return to London, we asked this same question of the assets we manage, being careful only to include companies which clearly meet Christiana’s criteria. It was interesting to see that currently 2.6% of our clients’ assets are invested in clean energy and technology.[1] While we had never thought of our holdings in these areas in terms of their ability to drive technological progress, (but instead focus on seeking out attractive investment opportunities from a thematic and fundamental characteristic standpoint), we believe this does demonstrate the importance of our ‘Earth matters’ theme in identifying an area of significant potential growth.

Another fascinating talk was on the topic of corporate engagement and its impact on investment returns. Our friends from the (CEAM), a division of the University of Cambridge’s Judge Business School with whom we have a partnership, have been working in conjunction with the PRI to measure the impact of their engagements with companies. The results are only in the preliminary stage but look interesting, and we believe support our long-held view that corporate engagement can make a difference to a company’s behavior and returns.

The findings showed a statistically significant increase in the return on assets of those companies where the PRI’s engagement had been a success over a four-year period when compared to businesses where engagement had not been effective. We look forward to working with the academics at CEAM to further understand this work, and to sharing this pioneering study with the investment community in the coming months.

Lastly, we enjoyed a number of presentations on how to integrate the UN’s Sustainable Development Goals into investment. This work is at an early stage, but we are convinced that it will prove to be the benchmark by which corporates and investment managers are judged in this space.

To summarize, the Berlin conference provided much food for thought, and we look forward to taking these considerations forward in our aim of identify companies with strong, durable, long-term growth prospects for our clients.

 

 

[1] Source: Newton, as at September 2017

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This is a financial promotion. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only.

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