Conference Report - Responsible Investor · PDF fileIt was moderated by Rob Lake of Rob Lake Advisors. Lake pointed to the “plethora” of long- ... RI EUROPE 2014 CONFERENCE REPORT

RI Europe 2014:the investor-corporate summit 4th & 5th June 2014 | The Tower Hotel | London

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RI Europe 2014:the investor-corporate summit 3rd - 5th June 2014 | The Tower Hotel | London

RI EUROPE 2014

CONFERENCE REPORT JUNE 2014

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By country:

Australia 3

Austria 1

Belgium 3

Brazil 1

Canada 5

Czech Republic 1

Denmark 6

Finland 3

France 35

Germany 15

India 1

Ireland 1

Italy 4

Japan 1

Kazakhstan 1

Liechtenstein 1

Luxembourg 3

Mexico 3

Netherlands 42

Norway 3

Russian Federation 2

Singapore 1

South Africa 7

Spain 3

Sweden 16

Switzerland 24

United Kingdom 305

USA 11

By region:

RI Europe 2014 attracted 502 delegates from 272 companies and 28 countries

United Kingdom 61%

Europe ex-UK 32%

Rest of World 7%

By job level:

CEO/CIO/Partner etc.12% MD/Director/ Business Head etc. 36%

Others 20%

Senior Management/Managers 32%

By type of company:

Asset owners and advisers 19% (eg pension funds, faith groups, investment consultants, fund buyers)

Asset managers 34% (and suppliers of investment management services)

Service suppliers 28 % (eg research agencies, indices, data vendors)

Corporates 6%

Others 13% (corporates, government

and regulators, associations,legal, academics etc)

• 3i• ABP• Access to Nutrition

Foundation• Achmea• ActionAid UK• Advanced Boardroom

Excellence• AGF International Advisors• Alecta• Alliance Trust Investments• AllianceBernstein• Anesvad

• AP1• AP2• AP3• AP4• AP6• APG Asset Management• Arabesque• Asia Research &

Engagement• ATP• Auriel Capital• AXA Group• AXA Investment Managers

• BA Pensions• BAE Systems• Baillie Gifford• Bank J. Safra Sarasin• Barclays• Barclays UK Retirement

Fund• BBC Pension Scheme• Blackstone• Bloomberg• Bloomberg New Energy

Finance• BNP Paribas Investment

Partners

• Bouwinvest• BP• Bridges Ventures• Brunswick• BSkyB• BSR• BT• BT Pension Scheme• Business Benchmark• BVCA• Caisse des Depots• CAMRADATA Analytical

Services

By Company:

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• Canada Pension PlanInvestment Board

• Carbon Tracker• Carnstone Partners• CBC TRANS• CBRE Global Investors• CCLA Investment

Management• CDP• CEMEX• CGG• Christian Aid• Church of Sweden• Cinven Partners• Climate Bonds Initiative• Climate Change Capital• CofE Ethical Investment

Advisory Group• COFRA Holding• Comgest• Crayford Ash• Credit Suisse• Danone• Dasos Capital• Deutsche Bank• Deutsche Telekom• Diageo• EBRD• ECI Partners• EIRIS• Element Investment

Managers• Empresas ICA• Environmentency Pension

Fund• ERM GmbH• Erste Sparinvest• Esmée Fairbairn

Foundation• Ethical Screening• Eurizon Capital• European Investment

Bank• Eurosif• F&C Asset Management• Fidelity Worldwide

Investments• Financial Reporting

Council• First State Investments• First State Stewart• FMO• Folketrygdfondet• Folksam• Franklin Templeton

Investments• FTSE Group• Future Fund• G4S• GEPF• GES• GlaxoSmithKline• Global Impact Investing

Network• Global Reporting Initiative• GMI Ratings• Goldman Sachs• Green Investment Bank

• Greenleaf Publishing• GRESB• Guggenheim Partners• Gulf Keystone Petroleum• Harvard• Hermes EOS• HgCapital• Holden & Partners• HowEsg• ICGN• Henley Business School• IIGCC• Impax Asset Management• Imperial College London• Independent Capital

Management• Inderst Advisory• Inflection Point Capital

Management• ING Investment

Management• InkunziESG• Institutional Investors

Roundtable• Investec Asset

Management• IPE• ISS Governance• Italcementi Group• IVOX GmbH• JANA Investment Advisers• Joseph Rowntree

Charitable Trust• JP Morgan• Kempen Capital

Management• Kepler Cheuvreux• KfW Bankengruppe• Kingfisher• KLP• KPMG• La Française Inflection

Point• Länsförsäkringar

Fondförvaltning• Lawyers 4 Better Business• Learning Schools Trust• LGT Financial Services• Lion Capital• Local Trust• M&G Investments• Maplecroft• Mercer Investment

Consulting• Merseyside Local Authority

Pension Fund• MHP Communications• Minoan Investment Capital• Mirova• MN Services• Morgan Stanley• MRG Comms• MSCI ESG Research• NAPF• NASDAQ• National Grid• National Pensions Reserve

Fund of Ireland

• Natixis Global AssetManagement

• Natural Capital Declaration• NEST Corporation• Newton Investment

Management• Nomura International• Nordea Asset

Management• Northern Trust Asset

Management• Norwegian Council on

Ethics• Notenstein Private Bank• Novethic• Oaktree Capital

Management• Oddo Securities• OECD• oekom research• Old Mutual• Ontario Teachers' Pension

Plan Board• OPTrust• Ownership Capital• Oxfam• Pension Protection Fund• Permian Global• PGGM• PIMCO• Pinsent Masons• PIRC• PKA• Plan de Pensiones BBVA• Plan de Pensiones Caixa -

Caixabank• Polden-Puckham

Charitable Foundation• Preventable Surprises• PRI Initiative• Prius Partners• Profit Through Ethics• QUICK• Quotient Investors• Rabobank• Radley Yeldar• Reed Smith• ReFine Research Charity• RepRisk• Resonance• Responsible Investor• Rob Lake Advisors• Robeco• RobecoSAM• Rockspring Property

Investment Managers• Rogge Global Partners• Royal DSM• Royal Dutch Shell• Royal London Asset

Management• RPMI Railpen

Investments• Ruffer• RWC• S&P Dow Jones Indices• SANOFI• Sappi

• Schroder InvestmentManagement

• SD-M• SEIU Master Trust• Seven Investment

Management• ShareAction• Siemens• SITAWI• SNS Asset Management• Social Finance• Solaron Sustainability

Services• SRI-Connect• Standard Chartered• Standard Life Investments• Strategic Assets Partners• Strathclyde Pension Fund• Style Research• Sustainable Investment

Partners• Sustainalytics• Swedish Ethical Council• Swiss Re• Sycomore Asset

Management• Symbiotics• T. Rowe Price• Takasaki City University of

Economics• Tang Family Foundation• Tesco• The Blended Capital Group• The Central Church Fund

of Finland• The Independent

Newspaper, Russia• The Pensions Trust• The Wellcome Trust• Threadneedle Investments• THS Partners• Towers Watson• Triodos Investment

Management• Trucost• UK Green Investment Bank• UK Trade & Investment

London• UKSIF• UNEP• UNEP Finance Initiative• UniCredit• Unilever UK Pension Fund• Unipension• UNISON• University of Bath• University of Edinburgh• University of Hohenheim• University of St Gallen• USS Investment

Management• valuecsr• Vesta• Vigeo Rating• Waterman EED• Waterman Group• WHEB Asset Management• WWF-UK

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502 delegates over twodays participated in high-level debate from some ofthe leading responsibleinvestment and corporatesustainability figures at theRI Europe 2014 Conferenceat the The Tower Hotel onJune 4-5.

RI Europe 2014 was produced by Responsible Investor which is published by Response Global Media Limited.

All photography by Benjamin Moore Photography

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Michael Baldinger, Chief Executive Officer ofRobecoSAM, lead sponsor for the conference,welcomed delegates to the RI Europe 2014conference with the observation that SRI is “not ahygiene factor any more” and that it needed to belook at clearly as a “business driver.” He called forresponsible investment to be “demystified”

pointing out that his firm’sSustainability Investing (SI) videoon YouTube video had received160,000 hits, suggesting that therewas public interest for the subjectif presented well: “Today,sustainability investing can beactive or passive, it can mean:theme funds, clean growth privateequity, engagement and voting,impact, best-in-class indices andthe list goes on. At RobecoSAM,we have spent the past few yearsworking on providing

sophisticated, tailored, and holistic sustainabilityinvesting solutions. It is our experience that assetowners need this. They need a manager that can

work within their motivations - financial, ethical,communication, impact – and goals and regulatoryframeworks.”

Baldinger said RobecoSAM saw a large untappedmarket out there, especially when the majority ofinvestors realize that sustainability investing is notthat complicated, is better performing than theythink and is driving money towards creating abetter society as a whole: “The most recentadvancement we made to help pension fundsacross Europe was creating a new role within theRobecoSAM team: the role of SustainabilityInvesting (SI) Client Specialist which is dedicatedsolely to speaking to pension funds in order tounderstand their specific needs and goals when itcomes to integrating ESG factors into theirportfolios: “Incorporating financially-material ESGfactors into your portfolio means long-termreturns and it means you are making a betterinformed investment decision. It also meansmitigating risk, fulfilling your fiduciary duty,achieving a positive socio-economic impact, andcreating value for ALL stakeholders.”

Day 1, Welcoming Remarks: Michael Baldinger

“ Incorporatingfinancially-materialESG factors intoyour portfolio meanslong-term returnsand it means you aremaking a betterinformed investmentdecision ”

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The RI Europe 2014 keynote speaker was EricWetlaufer, Head of Public Market Investmentsat the C$225m (€151m) Canadian PensionPlan Investment Board (CPPIB).

During his talk, entitled “Focusing Capital on theLong Term,” Wetlaufer said the CPPIB had startedan initiative ‘of the same name’ a year ago to doexactly that, and that since then the project had

attracted the participation of thelikes of asset management giantBlackRock and consumer goodsgroup Unilever. According toWetlaufer, the initiative is lookingat two methods to promote long-termism. The first is designing newlong-term metrics and benchmarksfor companies and investors. Thiswork is being done in conjunctionwith fellow Canadian pension fundthe Caisse de dépôt et placementdu Québec. More than 20

investment professionals were “deeply involved”.

The second had to do with engagement byinvestors with corporates regarding long-term valuecreation. “This includes ESG (environmental, socialand governance) factors, but goes beyond them toinclude a more broad understanding of thecompanies’ long-term strategy,” Wetlaufer said. Heargued the case for long-termism, saying marketshort-termism was not only adversely influencingthe pricing of securities, but also leading to “herdbehaviour, excess volatility and bubbles”. He spokeof investment returns “not over the next quarterbut the next quarter century”. On the corporateside, Wetlaufer said companies were telling theCPPIB that “innovation and strong financial returnsare the top two benefits that can be realised if theirsenior executives took a longer term view whenmaking business decisions.” Since the CPPIB,together with the US business consultancyMcKinsey, launched the initiative, 17 companiesand investors have joined it including Singaporestate investor GIC and Indian industrial group Tata.The results of the project are to be announced inan action plan next year.

Day 1, Conference Keynote: Eric Wetlaufer

“ innovation andstrong financialreturns are the toptwo benefits that canbe realised if seniorexecutives take alonger term viewwhen makingbusiness decisions ”

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The opening plenary debate of the conference,featured Erik Breen, Manager, SRI at TriodosInvestment Management, Matthew Kiernan,Chairman, La Francaise Inflection Point, PaulLee, Head of Investment Affairs at theNational Association of Pension Funds andHelene Winch, Director of Policy and Researchat the Principles for Responsible Investment.It was moderated by Rob Lake of Rob LakeAdvisors. Lake pointed to the “plethora” of long-term investment projects currently underway: theCPPIB/McKinsey initiative for example, and work by

the OECD and PRI. Kiernan, seeking the evidencethat the “long-term works and short-term hurts”,identified a ‘brontosaurus in the room’, which hedefined as a lack of institutional courage to act in a“highly intermediated value chain” and take radicaldecisions about investment. He called for a dose of“organisational testosterone” to kick-start aconservative industry. Taking up the theme andspeaking from the floor, delegate RajThamotheram suggested instead the bondinghormone oxytocin, to encourage collaboration.Breen agreed with Kiernan in calling for systemic

Day 1, Plenary 1: “Focusing capital on the long term”

Paul Lee Matthew Kiernan

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change: “We need true leadership, and to nolonger think in metrics. The solution is realstewardship.” He went on: “If you do things for the

right purpose the business case willfollow.” Breen said he wouldfavour a form of integratedreporting for the investmentindustry, to show how it createsvalue under the IntegratedReporting initiative’s “six capitals”structure. The NAPF’s Lee stressedthat everyone who looks aftermoney is a fiduciary, therefore,

“the only way we can do our jobs is to think aboutour beneficiaries”. The PRI’s Winch advocated re-thinking the way pension trustees work: “a fewmore women, a few less retired people”. The PRI,she said, is looking at 12 factors for inclusion ininvestment mandates, including beliefs, timehorizons, turnover targets, risk management andmanager compensation. Keith Ambachtsheer, therespected Canadian pensions expert, is working onthe evidence to be presented at the ‘PRI in Person’conference in September.

Day 1, Plenary 1: “Focusing capital on the long term”

“ We need trueleadership, and tono longer think inmetrics. Thesolution is realstewardship ”

Helene Winch

Rob Lake

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RI Europe’s second plenary session dealt with thestate of affairs in shareholder engagement. KirstyCollins, Director of Investor Relations at UKpharmaceuticals firm GlaxoSmithKline, notedthat the company, at the direction of its topmanagement, welcomed engagement fromshareholders and did its utmost to answer theirquestions and concerns. Collins also described thequality of the engagement on ESG (environmental,social and governance) issues by shareholders as“very high.” The discussion then turned to the US.Gary Hewitt, Head of Research at GMIRatings, said there was plenty of “event-driven”engagement going on in that market, citing as anexample the shareholder votes on executive paythat got a lot of media attention in the past fewyears. However, Hewitt also said most engagementbetween shareholders and US companies tookplace behind the scenes. According to him, theShareholder-Director Exchange (SDX), launched lastFebruary to arrange dialogues between big

investors and companies, was an ideal platform forsuch discreet engagement. SDX’s participantsinclude US asset managers BlackRock, State Streetand Vanguard as well as pension schemes OntarioTeachers’ Pension Plan (OTPP) and Florida’s StateBoard of Administration. Roel Nieuwenkamp,Chairman of the OECD’s Working Party onResponsible Business, brought upthe problem of investors not,individually, being able to inducecompanies to perform better on ESGissues. “The big question is what doyou do if you only own 1% of acompany whose behaviour you don’tlike. That’s a difficult question, asyou clearly don’t have leverage.” ButNieuwenkamp said that rather than“cut and run,” responsible investors should “stayand improve.” To achieve that, he recommendsthat investors form coalitions as they did againstUK mining firm Vedanta. Indeed, investors with a

Day 1, Plenary 2: “What might a brave new world ofownership capital look like?”

“ The big question iswhat do you do ifyou only own 1%of a companywhose behaviouryou don’t like. ”

David Styles, Kirsty Collins and Roel Nieuwenkamp

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shared concern about a company can even enlistthe support of the OECD as a mediator, he said. Inthe Vedanta case, Nieuwenkamp said that the firmultimately did not go ahead with a bauxite mine inIndia because a coalition of several investorsstaunchly opposed it for human rights reasons.Four years after its launch, David Styles, Directorof Corporate Governance on the FinancialReporting Council (FRC), gave the audience anupdate on the UK Stewardship Code, whichrecommends that investors regularly engage withcompanies, be transparent about their voting and

form coalitions with others to gain leverage. Stylessaid the Code had been very successful with around300 asset managers and asset owners havingsigned up. However, Styles also said the FRC wouldreview the Code’s implementation because someengagement between investors and companies wasstill too “skin deep.” As part of the review, the FRCis examining the percentage of mandates awardedby asset owners to asset managers that explicitlyrefer to stewardship and will unveil its findings laterthis year.

Day 1, Plenary 3: The future of corporate and investor reportingand measurement: financial numbers in a sustainable context?

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Moderating the panel, Nelmara Arbex, DeputyChief Executive, Guidance Support andInnovation at the Amsterdam-based GlobalReporting Initiative (GRI) said financialmateriality was key to the GRI reporting processand that the organisation had included investors inits reporting process from the beginning. Theensuing discussion focused on whether corporatereporting was actually being used by investors andwhether the current data gathering process by ESGresearch firms was onerous. David Adkins, ChiefInvestment Officer, The Pensions Trust, whichlooks after the retirement schemes of 2,400 not-for-profit organisations, noted that it was difficultto plough through the large sustainability reportsof companies and so the Trust was looking atcomparable data that its asset managers should belooking at: “We believe ESG factors add value overthe long term and that they should be integral tothe way our asset managers operate and that theyshould be asking those questions of investeecompanies.” He said the Trust would soon belooking to grade its asset managers on their effortsand would likely publish that information in its ownannual report.


David Adkins

Remy Briand and Marleen Janssen Groesbeek

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Remy Briand, Managing Director, Global Headof Index and ESG Research at MSCI, waschallenged on whether MSCI used questionnairesin its information gathering, which corporates havecomplained are time consuming and coming fromtoo many different parties. Briand said they didn’tand that questionnaires were “probably useless”.He said sustainability reports were a large, usefulsource of corporate information alongside externalthird party sources such as court fines, breaches ofinternational norms, access to ‘freedom ofinformation’ data and media reports. But he agreedthat companies and stakeholders had told thecompany that there were too many ‘asks’ on dataand that the industry should be careful of that.However, Julia Kochetygova, Senior Director,Product Management, S&P Dow JonesIndices, which does use questionnaires forgathering the sustainability data composition of theDow Jones Sustainability Index, said the surveysprovided “robust proof” that companies weredoing what they said. She argued that there wouldbe little sustainability disclosure without them. Inthe future she said she would like to see moremandatory disclosure encouraging companies tolook at sustainable performance as part of their

core business. Only 37% of companies, she said,could demonstrate sustainability-related costssavings today: “Unless companies recognize theareas where they can see tangible benefits, then wewon’t get the kind of reporting we want,” she said.Marleen Janssen Groesbeek, SustainabilityManager Engagement & Learning at RoyalDSM, the Dutch multinational life sciencescompany, who has seen thecorporate reporting process from allsides as a journalist, a corporategovernance professional and acorporate sustainability expert, saidthere had been huge improvementsin the way sustainability data wasviewed as ‘serious’ corporateinformation, but she seriouslydoubted anyone was actually usingit: “We do refer to sustainability inthe context of turnover and higher margins, but inthe same vein we also have to think about howmuch money its costs us to produce thisinformation. Is it really looked at? From acost/benefit perspective you could ask whether weshould skip the report and save ourselves a lot ofmoney?”


Julia Kochetygova

“ Unless companiesrecognize the areaswhere they can seetangible benefits,then we won’t getthe kind of reportingwe want ”

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The moderator was Howard Pearce, Director,HowEsg (formerly head of EnvironmentAgency Pension Fund)

Annie Degen, Special Advisor, long termfinance and energy efficiency coordinator atUNEP FI, noted that of the EU’s 2020 targetsrequiring €85bn in energy efficiency savings,€65bn of these would come out of the builtenvironment, indirectly meaning propertyinvestors. She noted that initiatives in Australiameant that there was an obligation for companiesto look at the potential opportunities in energyefficiency, which she said could be a potentialmodel for Europe. She said a recent UNEPFI report,titled: “Commercial Real Estate: Unlocking theenergy efficiency retrofit investment opportunity”,was a good first step for investors wanting tofurther investigate the opportunities.

Mirjam Staub-Bisang, Co-Founder andManaging Partner of Independent CapitalManagement, noted that resource efficiencytechnologies is a global megatrend with estimated8-12% growth per annum, or two to three times

that of global GDP. The largest markets, she saidwere energy and water efficiency.

The Matrix Day 1, Stream A: Sustainable investor asset allocation and ESG integration

Panel 1Green technology: water treatment, waste and energy efficiency

Annie Degen

Mirjam Staub-Bisang


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The moderator was Hugh Wheelan, ManagingEditor, Responsible Investor. Sara Nordbrand,Head of Corporate Engagament, Church ofSweden, for the church’s €630m in treasuryassets, said it had become more pro-active with itsexternal asset managers on long-term sustainability,including holding debates with their fundmanagers and looking closely at the issue ofincentives. She said they wanted to exchange moreinformation on the theme with other asset owners.

James Corah, Deputy Head of Ethical &Responsible Investment, CCLA, said the fundmanager ran money for more charities than anyother fund manager in the UK, and provided thesecretariat to the £15bn Church Investors Group(CIG) of 52 members, which encouragesinvestment policies based upon faith. Morepractically, he said, the CIG supports academicassessment of corporate engagement as well asinternational engagement co-ordination.

Panel 2Are faith investors getting active with their assets?

Hugh Wheelan, James Corah and Sara Nordbrand


Panel 3Renewables infrastructure: wind, solar and hydro

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The moderator was Aled Jones, Head ofResponsible Investment – EMEA, Mercer.Angus McCrone, Chief Editor, BloombergNew Energy Finance pointed out that while thelast two years had seen a drop in overallrenewables investment, down more than 20% innew investment per annum from $318bn in 2011to $254bn in 2013, it appears a corner may havebeen turned in Q1, 2014, which saw higherinvestment than Q1, 2013. But, he noted theimportance of looking at the levellised cost ofelectricity across different renewables sectors,pointing out, for example, that offshore wind hadgot more expensive because of deeper waterprojects, while solar/PV had become radicallycheaper. He said BNEF predicted that by 2030 73%of all total spend on power generation would beinto renewables, but that this would still only makeup 36% of total energy production.

Eli Bleie Munkelien, Vice President, CorporateResponsibility and Corporate Governance, atKLP, Norway’s largest life insurance company witha primarily passive investment portfolio, haddecided to marry returns and responsibility in amore active fashion by investing in a new portfolioof renewable energy projects in developingcountries in Africa south of Sahara to the tune ofNOK 1 billion, over a period of 5 years. Thecompany invests alongside Norfund, theNorwegian investment fund for developingcountries, whose aim is to combine commercialreturns with environmental sustainability and acontribution to economic growth and povertyreduction.

Angus McCrone, Aled Jones and Eli Bleie Munkelien


Panel 4ESG integration in equities

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Emma Hunt, Senior Investment Consultant,Towers Watson, moderated.

Christopher Greenwald, Head ofSustainability Investing Research atRobecoSAM and Willem Schramade, GlobalEquity Analyst at Robeco said the majorproblem today with most ESG integrationframeworks is that they are actually “forms ofaggregation”, dealing with the fact that companiesdon’t report the material impacts of sustainabilityand address too many issues that are isolated frombusiness impacts. Structurally, they said, assetmanagement remains constrained by short-termperformance, meaning that medium- to long-termstrategic ESG factors were ignored. To that end,they said Robeco and RobecoSAM focused analysison the ‘most financially material’ sustainabilityfactors for each company working in closecollaboration with equity and fixed income analystsand also helping to modify the longer-termassumptions that can capture the impacts ofsustainability issues on company financial models.

Bernard Icard, Head of Proprietary ListedEquity, Caisse des Depôts, France said the ‘longterm’ for the Caisse was an average 7-year holdingperiod in large companies. Its €14bn listed equityportfolio has 110 companies and is run in abottom-up, stock picking style. Icard noted that theCaisse’s philosophy is to be a shareholder not aninvestor and that it had taken five years to changethe way staff worked in terms of putting ESGfactors into its stock selection, where he said itaccounted for 10% of the decision, of which 40%is on governance factors, although he noted thatthe Caisse was looking to go beyond this 10%: “Wehave to ask ourselves what we have missed in termsof big financial problems that have had major ESGrisks in them. There were warning signs about BPMacondo that many ignored, just as there werelending issues and bonus incentive problems priorto the financial crisis. For the future, we are lookingespecially at issues like bankers’ bonuses asfinancial risks.”

Bernard Icard

The Matrix Day 1, Stream B:Corporate/ESG Research Issues

Panel 1Board diversity and gender: Are today’s corporate boards fit for a fast-moving, mixed economy?

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The speakers were Tamara Box , Partner at ReedSmith and Member of the SteeringCommittee at the 30 Percent Club, and HelenPitcher , Chairman of consulting firmAdvanced Boardroom Excellence. The sessionwas moderated by Mike Tyrrell, Editor of SRIConnect. Pitcher observed that the Chairs ofcompany boards were now thinking “much morebroadly” about diversity and there was much moreopenness. Indeed, she said there was a danger ofhaving an “old girls’ network”: a relatively smallnumber of women getting multiple directorships.The way round this was to make sure there was astrong pipeline of female executive talent to feedinto the board recruitment process. Boards neededto take a role in succession pipelines, she said,because the appointment of female non-executivedirectors in isolation was merely a “quick fix”. Boxechoed this, pointing out that the so-called‘marzipan layer’ just under the board, the executivecommittee level, comprises just 6% women onaverage. On the question of women’s lack of top-level experience she said: “Do men come out of thewomb having been on a board?”

Tamara Box and Helen Pitcher


Panel 2Where next for the fossil fuel divestment campaign?

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The speakers were Mark Campanale, Founderand Executive Director of the Carbon TrackerInitiative and Martin Grosskopf, VicePresident and Portfolio Manager, Director ofSustainable Investing at AGF InternationalAdvisors. The moderator was Eric Roston,Sustainability Editor for Bloomberg.com.Campanale discussed his work on ‘unburnable

carbon’ and how it is“fundamentally an investmentissue”. He explained how rigorousthe research needs to be when yougo to meet companies: “Boy, do youhave to know your stuff!”. Hispresentation inevitably turned todivestment, with Campanale saying:

“Once you’ve sold your shares what do you do? Tellthe next guy to sell his shares? The problem ismarkets. The first thing we have to do is close thedoor on coal IPOs.” He said Carbon Tracker’s firstreport – the one picked up by Bill McKibben that

sparked the current fossil fuel divestment debate –doesn’t even mention divestment, but added:“without Bill this issue could have been a flash inthe pan.” If there is to be divestment, it should beat the individual project level, Campanale argued.The recent response from ExxonMobil toshareholders seeking assurances about its carbonrisks was “a very long suicide note by the oilindustry”, he said. Grosskopf, said current marketsignals don’t support divestment: “in fact I seepeople looking to invest”. ESG approaches wereunlikely to alter the trend. He added that weneeded to give oil firms’ views “more credencethan we tend to”, noting that companies tended tobe “a little bit more astute than investors”. He saidAGF’s investment approach was to run a fund ofthematic allocation to environmental solutionsproviders and those companies making efficientresource use, which he said could provide a highimpact approach on the environment and havediversification benefits for investors.

“ Once you’ve soldyour shares what doyou do? Tell thenext guy to sell hisshares? ”

Eric Roston and Mark Campanale


Panel 3Enhanced analytics: does ESG/broker research have the breadth,timeliness and quality to be relevant to mainstream investors?

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The speakers were Jean-Philippe Desmartin,Senior Analyst and Head of ESG Research atOddo Securities and Neil Brown, SRIInvestment Manager at Alliance Trust. It wasmoderated by Robert Schwob, Founding ChiefExecutive of Style Research. Desmartin notedhow brokers “need a price signal in order to bepaid for research. If investors want ESG researchthey have to pay for it.” ESG was increasinglybecoming a factor in broker reviews by clients, hesaid. He touched on the decision to relaunch theEnhanced Analytics Initiative, a project that ranfrom 2004-2008 to promote good ESG research,saying he was confident the initiative would make

good progress. Brown warned that not paying forgood research meant it was “going to go”.Mainstream analysis, he argued,was mostly of poor quality andunfocused in delivery: “It’s prettyterrifying how little is being read.”So, the work needs to be relevantand material. On other hand, SRIresearch, he said, is at least as goodas the mainstream in terms ofquality and timeliness, and it is getting read. Heurged users to adopt the concept of a “goodbuyer” and think about what constitutes a decentmargin for providers.

Neil Brown, Jean-Philippe Desmartin and Robert Schwob

“ If investors want ESG researchthey have to pay for it ”


Panel 4Sustainability assessment of governments and what it means forsovereign fixed income investors

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The speakers were Andreas Knörzer, Head of theAsset Management Division at NotensteinPrivate Bank and Lizabeth Campbell, Director,Human Rights and Societal Risk atMaplecroft. The moderator was Vipul Arora , Co-Founder of Solaron Sustainability Services.Campbell explained how structural risks impactgovernment sustainability and thus investmentrisks, feed into an impact on long-term governmentbond yields. For example, Spain, faced with a seriesof problems, was now a medium risk (from lowbefore). Political freedoms and social gains wereleading indicators of political risks, she said,pointing to the likes of Ukraine, Libya, Thailand andSyria. Knörzer looked at how the efficient allocationof scarce resources could enhance a government’slong-term performance and solvency. Notenstein,he said, has created a sustainable ‘pool’ of countiesas an investment universe, including Germany,Switzerland, Norway and Australia. Excluded arecountries such as Spain, Greece, the US and Russia.He pointed out that fixed income analysts havemuch better quality data from sources such as theIMF than their equity analyst colleagues.

Responding to a question about S&P’s decision tostart factoring environmental issues into theirratings, Knörzer was brief: “Finally they got it!”

Andreas Knörzer

Lizabeth Campbell and Vipul Arora

The Matrix Day 1, Stream C: Investor/corporate themes and market sustainability

Panel 1Environment: fracking, fossil fuel and ‘at risk’ sectors from tighteninggreen regulation

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RI Europe 2014’s Matrix Stream C got underway inthe afternoon of the first day with a discussion ofthe potential risks to investors in the fossil fuelsindustry. The panel featured Dana Sasarean,Senior Analyst at MSCI ESG Research andSasja Beslik, Head of ResponsibleInvestments at Nordea and was moderated byJane Goodland, Senior InvestmentConsultant at Towers Watson. Sasarean listedthe opportunities and risks linked to the currenthydraulic fracturing (or “fracking”) boom in theUS. While fracking should lead to huge newreserves of natural gas in the US, Sasarean saidinvestors should be aware of the numerousenvironmental and health concerns surroundingthe process, not the least of which was its hugeneed for water. This is relevant considering thatmany areas in the US are being increasingly hit bydrought. Moreover, air and water pollution causedby fracking could prompt tighter regulation of thecompanies in the sector, the MSCI analyst said.Investors should therefore pick fossil fuelcompanies that attempt to limit their

environmental impact, Sasarean added, citingWoodside, Inpex and Novatek. Beslik agreed withSasarean that the fracking boom in the US hadprovided investors with both a hugeopportunity but also serious risks,which is why his firm would, by theend of the year, come up with a newinvestment strategy for the sector:“We will have a quite clear picture ofhow the fossil fuel industry willdevelop not just over the next twoyears, but the next ten. And we willalso try to figure out that asindustrialised countries switch torenewables how the investor will beable to exit the industry withoutsacrificing performance.” Beslik alsosaid that the big investors he’s talkedto recently are not buying the“stranded assets” argument, as theydo not see tighter regulation of thefossil fuel industry on the horizon.

“ While frackingshould lead to hugenew reserves ofnatural gas in the US . . . investorsshould be aware ofthe numerousenvironmental andhealth concernssurrounding theprocess, not the least of which was its huge need forwater ”

Jane Goodland


Panel 2Green bonds and new financing methods for green growth: going mainstream?

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The emerging green bonds market was the topicdiscussed during Matrix Stream C’s second panel.The speakers were Lenora Suki, Senior ProductStrategist for Sustainability at Bloomberg LPand Eila Kreivi, Head of Capital Markets at theEuropean Investment Bank (EIB). The panel’smoderator was Sean Kidney, who is the Co-Founder and Chief Executive of the ClimateBonds Initiative (CBI), an NGO that promotesinvestment in and clear standards for green bonds.Setting the stage for the discussion, Kidney said theCBI believes that the green bond market couldgrow to $100bn next year from $40bn this yearand to as much as $300bn by 2018. The market iscurrently $20bn. According to Suki, the growth isbeing driven by a desire among investors for“stable value vehicles”. “Up until now, if youwanted to invest in green, really you were doing sovia equities and perhaps taking on more beta riskthan you’ve been interested in. So I think there istremendous pent-up demand for the bonds,” she

said. Kreivi of the EIB, which has issued €2.6bn ingreen bonds – the largest volume to date – addedthat it was “exciting” to see that the buyers werenot just socially responsible investorsbut also large mainstream players.“The kind of growth we are talkingabout cannot happen without thoseinvestors,” she said. With theproceeds from its green bonds, theEIB is financing projects in three mainareas: renewable energy, energyefficiency and sustainable transport.Kidney closed the panel by pointingout two hindrances to furthergrowth. A minor one, he said, wasthat deal flow – i.e. climate friendly projects to befinanced – is currently not as strong as it could be.A major one, he said, was the possibility of agreen-washing scandal, which is why the CBI is sointent on ensuring the integrity of the green label,he said. Suki and Kreivi shared the sentiment.

Eila Kreivi, Lenora Suki and Sean Kidney

“ Up until now, if youwanted to invest ingreen, really youwere doing so viaequities and perhapstaking on more betarisk than you’ve beeninterested in ”


Panel 3Measuring the social impact of responsible investment

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The third panel of Matrix Stream C dealt withwhether responsible investing can really have asocial impact. The speakers were Annika Tverin,Director of Social Finance, a UK non-profitorganisation, and Iain Richards, Head ofCorporate Governance and ResponsibleInvestment at Threadneedle, the London-basedfund manager. The panel was moderated by PietKlop, a Senior Advisor for ResponsibleInvestment at Dutch pension giant PGGM.

During the discussion, Tverin noted that a pensionfund, even with small sums, could have a hugeimpact by investing in companies that specialise inenvironmental or social causes. Such corporateexamples that Social Finance works with includeHCT Group, which provides low-costtransportation to people who do not have accessto mainstream transport, Cool2Care, which recruitsand trains caregivers to the disabled, and OneServices, which provides support to ex-convicts toreduce the risk of reoffending. HCT Group andCool2Care get their revenue through public sectorcontracts. In the case of One Services, the UKjustice ministry provides payments based on theextent to which reoffending is avoided. According

to Tverin, investors could potentially receive aninternal rate of return of up to 14% from a currentproject by One Services in Peterborough, UK. “Therisk to the investor is of course thatthat project does not succeed, andthe justice ministry doesn’t pay,” she added. According to Richards,investors looking to have a socialimpact would find a partner inThreadneedle Investments, as theasset manager had fully integratedenvironmental, social andgovernance (ESG) analysis into itsinvestment process. “Core to ourapproach is the believe that wellgoverned companies are betterpositioned to manage the risks andchallenges inherent in business andto capture opportunities that help deliversustainable value and returns for our clients,“ hesaid. Richards noted that Threadneedle had gone astep further as part of a policy of specificallytargeting social returns by launching a social bondfund in the UK in January 2014 that aims toachieve both an investment return and a positivesocial outcome

“ a pension fund,even with smallsums, could have ahuge impact byinvesting incompanies thatspecialise inenvironmental orsocial causes ”

Annika Tverin, Iain Richards and Piet Klop


Panel 4Impact investment: capital philanthropy or an institutional gradeinvestment approach?

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The panel was moderated by Caroline Mason,Chief Executive, Esmée Fairbairn Foundation,

and speakers were Brian Bailey,Non-Executive Chairman of UKproxy firm PIRC and MegBrown, UK Liaison for theGlobal Impact InvestingNetwork. According to Bailey, thereare compelling reasons forinstitutions like pension funds tohave a positive social impact whenthey invest. Beyond suiting schemesthat have a responsible investmentpolicy, impact investing provides atangible financial benefit, namelyrisk diversification, he said. He cited

several examples including that for medical careaccess, education, infrastructure, financialinclusion, resource utilities (food, energy, water) aswell as conservation and climate protection. YetBailey also said that while, in his view, impactinvesting was the “right thing to do,” there areseveral challenges associated with it. Chief amongthem is the lack of a track record, liquidity andscale.

Tackling the issue of liquidity, Brown said the sectorwas attracting more demand as evidenced by theThreadneedle fund launch that invests in debtissued by organisations that support sociallybeneficial activities and economic development inthe UK. The growth of Impax, the £2.25bn UKasset manager that specialises in environmentalinvesting was another example, she said. Brownsaid property should be used more to make apositive social impact, making the theme moremainstream.

“ there are severalchallengesassociated with it(Impact investing).Chief among themis the lack of atrack record,liquidity and scale ”

Meg Brown, Caroline Mason and Brian Bailey

The Matrix: Day 2. Stream A Sustainable investor asset allocation and ESG integration

Panel 1Can indices really make institutional portfolios more sustainable?

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The moderator was Francois Passant , ExecutiveDirector at Eurosif. The speakers were Paul Cox,Investment Advisor at NEST Corporation andMamadou-Abou Sarr, Senior Vice Presidentand Senior Equity Strategist with NorthernTrust Asset Management. Cox explained howthe UK workplace scheme uses pooled funds in an“unusual marriage” of index investment styles andan “explicit organisational belief” in ESG. He relatedhow NEST has run a statistical project with indexfirm FTSE that found that environmentalmanagement was the second biggest portfolio risk,which both institutions found “alarming”. But itallows NEST to focus its stewardship activities with

no wasted efforts for members: “It’s all aboutstewardship but it’s very targeted and statisticallyproven.” Sustainability, he said, was a ‘value’ not avalues decision. Northern Trust’s Sarr went throughthe firm’s project with ISS to look at the ownershipstructures of emerging markets companies,focusing on those that are quasi-government/familyowned and at those which have issues aroundboard composition/independence. This, he said,had led to an exclusion list (“the worst of theworst”) and a custom index product with MSCI.There would be an announcement shortly about anengagement overlay partner to add a governancecomponent, he added.

Paul Cox, Francois Passant and Mamadou-Abou Sarr


Panel 2ESG Integration in fixed income

Simon Howard, Chief Executive Officer ofUKSIF moderated, with speakers Pernille Jessen,Portfolio Manager at Unipension and MikkelVelin, Global Credit Analyst at Rogge GlobalPartners. Jessen explained how the €13.5bnDanish pension fund has an €8bnfixed income portfolio, of which€1.5bn is in emerging market debt. Akey point she made was thatUnipension was very cautious aboutnot “scuppering” positive developmentin developing countries: “We just haveto accept they’re starting from adifferent point.” Emerging marketdebt and ESG were “very, very closelyconnected” given issues aroundenvironmental degradation and social factors. Butmore research and data was needed. Rogge’s Velinpresented a case study of how the firm hasavoided media group News Corp. given itsownership structure and lack of substantial code ofethics. “We avoided it historically withoutadvertising the fact,” he said – adding Roggedecided not to buy into News Corp. before or afterthe phone hacking scandal broke in 2011.

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“ Rogge decided notto buy into NewsCorp. before or after the phonehacking scandalbroke in 2011 ”

Pernille Jessen and Simon Howard

Mikkel Velin


Panel 3ESG integration in private equity

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The moderator was John Hodges, DirectorFinancial Services at BSR. The panel debated theextent to which private equity ‘gets’ ESG. DavidRussell, Co-Head of Responsible Investment

at the UniversitiesSuperannuation Scheme (USS),spoke of the difficulty, historically,that there has been in gettingprivate equity General Partners (GPs)to take ESG seriously. He said: “I’vehad meetings with GPs in the pastwhere they look at you like acommunist,” though this haschanged over time. Russell pointed

out that 10% of the signatories to the Principles for

Responsible Investment are now private equity GPs.He said a lot of GPs do look at ESG issues, it’s justthat the terminology is different. Russell felt thatreporting back to clients (the Limited Partners, orLPs) is less important than sometimes thought:“What is important is that this is actually done by the GPs and portfolio companies:communication is just the output.” Jesse deKlerk, Investment Director at Robeco, said he’d seen a change in client demand in terms ofsustainability since the financial crisis in that LPswant to avoid negative surprises. Discussion turned to the PRI’s ESG Disclosure framework, with Russell saying its strength lies in that itincludes both GPs and LPs.

“ I’ve had meetingswith GPs in thepast where theylook at you like acommunist ”

John Hodges, Jesse de Klerk and David Russell


Panel 4Post-investment engagement with portfolio companies - the private equity journey to date

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The panel speakers were Clara Barby, Partner &Head of IMPACT+ at Bridges Ventures, AlisonHampton, Legal Counsel of HGCapital andAlan Roux, Operating Partner at Blackstone. Itwas moderated by Penelope Latorre , TechnicalDirector of the Waterman Group. Hamptonexplained how HGCapital’s usual acquisitions weretypically smaller companies and the challenge wasto put RI policy into a “language they couldunderstand”. Roux said governance was a“lynchpin” at portfolio companies and that thefirm’s Chief Sustainability Officer is targeting$100m in annualized savings, via, for example,rooftop solar installations at portfolio companies:“Nothing hits the bottom line like theenvironmental initiatives,” he said. In terms ofrenewable investment, Blackstone is backing themassive Meerwind project in Germany as well asthe Bujagali hydroelectric project in Uganda. Oneissue was how to get ESG onto the agenda atportfolio companies such as Hilton Hotels andUnited Biscuits. But Blackstone hasn’t signed up tothe PRI, as Roux says the firm feels it is already“ticking most of the boxes” and because of thePRI’s specific reporting requirements. Barby said

Bridges had a specific programme of post-investment engagement with portfolio companiesto ensure they behave as well as they perform. This,she said, included regular engagement to manageimpact risks and identify social value and thenreport this back to clients.

Clara Barby


Panel 1Food safety, health scares and consumer responses?

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The moderator was Hugh Wheelan, ManagingEditor, Responsible Investor. Helena ViñesFiestas, Head of Sustainability Research BNPParibas Investment Partners, noted that thebroad debate around food and nutrition could besummed up by “too much” transfat, sugar, alcoholand salt, and “not enough” fibre, omega 3 fattyacids and micronutrients. She said there were alsoquestion marks over additives, growth hormones,sweeteners and nanotechnology in food. Theupshot, she said, was increased food productrecalls in recent years, mainly for mislabelling(37%), but also because of food-borne pathogens(33%), which investors should be able to map therisk of. Rory Sullivan, Independent consultantand Expert Adviser to the BusinessBenchmark, Farm Animal Welfare, said that onthe back of the ‘horsemeat’ scandal, there wasincreasing awareness among investors that foodprovenance was a significant risk. He explained thatthe Business Benchmark on Farm Animal Welfarelooked at company’s responses to the risk on threelevels: management commitment and policy,governance and management, and innovation and

leadership, which split companies out into six tiersof performance that investors should take intoaccount in their engagements with thesecompanies.

Rory Sullivan and Helena Viñes Fiestas


Panel 2The future of food products: exploring companies’ responses to global health issues

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Moderating the session, Rachel Crossley, SeniorAdvisor, Access to Nutrition Index, presentedthe global Index, which was launched in March2013 with support from the Bill & Melinda GatesFoundation, The Wellcome Trust and GAIN. Itscores and rates 25 of the world’s largest food andbeverage companies on their commitments,performance and disclosure to address obesity andundernutrition. Nikki Gwilliam-Beeharee, Foodand Health Research Manager, Vigeo Rating,added a third issue ‘ageing’ to these two majorglobal health issues. She noted that the three‘megatrends’ are increasingly feeding intounsustainable health service costs and regulationsuch as Mexico’s 10% tax on fizzy drinks. Alongsideincreasing numbers of lawsuits and challenges tolabelling and advertising claims, she said investorsneeded to look along the value chain to assesswhat the impact – both risks and opportunities - tocompanies within their portfolios could be.Martine Piaia, Nutrition Governance & PolicyManager at Danone, explained how thecompany had been gradually moving its productrange towards more healthy options over decadessince the 1970s towards fresh dairy and waterproducts as well as early and later life nutrition

foods. Danone uses what it calls “nutritionalcompetitive mapping”, which she said aimed formore healthy products while ensuring thatcustomers were not lost through changing tasteresults. In the last three years, Piaia said 31% of itsproducts had recorded nutritional improvements.

Nikki Gwilliam-Beeharee, Martine Piaia and Rachel Crossley


Panel 3Social media and online campaigning: is it changing the way consumersthink about brands and sustainability?

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The moderator was Dwayne Baraka, Founder,valueCSR. Catherine Howarth, Chief ExecutiveOfficer at ShareAction, the NGO for responsibleinvestment, pointed to a number of ways it wasusing social media to amplify its voice. For example,she said Twitter campaigns around shareholderannual general meetings were good ways ofdrumming up attention on particular issues, butalso of praising asset managers that had thecourage of going public over concerns atcompanies. In addition, she said visual ‘memes’and ‘selfies’ at AGM gave such events a morehuman angle. An on-line campaigning crescendo,she said was now also possible through a‘thunderclap’, a timed, targeted tweet/post byhundreds of activists at the same time to create abig impact on the web. Eddy Lambert, Web andMobile Channel Manager, and Lydia Prieg,Private Sector Policy Advisor, Oxfam GB,

explained how Oxfam’s Behind the Brandscampaign, a digital public lobbying effort to enableconsumers to pressure food and drink companieson issues like health and the environment. Priegsaid Oxfam focused on being what they called a‘critical friend’ because of the lack of success ofprevious ‘knocking’ campaigns. She said the NGOused ‘carrot and stick’ rankings for companies ontheir responses to issues, and worked withcompanies and stakeholders such as investors fortheir input on improving the scores. Lambert saidthe NGO had also tried to be more brand savvyitself, often co-opting the sales slogans of theirtargets. For example, he showed how it had takenPepsi’s “Love Pepsi” brand ‘collateral’ andjuxtaposed it with a “Hate Pepsico’s lack of policieson water” slogan, and feeding into the trend to‘like’ things on social media.

Catherine Howarth


Panel 4Green real estate: understanding the value of sustainability

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Helena Viñes Fiestas, Head of SustainabilityResearch at BNP Paribas Investment Partners,moderated. Neal Shegog, Partner atRockspring Property Investment Managers,which runs €6.1bn in European real estate, saidthe manager took sustainability seriously but alsohad to grapple with conundrums around pricingand client rationale. He said Rockspring believedenvironmentally efficient properties shouldoutperform in the long term through acombination of cost saving, better tenancy dealsand re-sell value. However, he noted that currentlytenants and landlords would not pay extra forenergy efficient buildings and so sustainablebuildings were not necessarily performing better,nor justifying the risk/return trade-off. He notedthat Rockspring believes the dynamic will change astenants become more concerned about energycosts, as planning becomes easier for sustainablebuildings and valuations begin to reflect both.

Sander Paul van Tongeren, Head ofSustainability Global Real Estate andInfrastructure at APG, the €359bn Dutchpension fund manager, which runs 10% of itsassets in real estate, said the firm believed ESGfactors contributed to risk-adjusted returns,demonstrated social responsibility and contributedto the integrity of markets. Practically, he says thefund manager uses the GRESB real estatesustainability benchmark, of which it was foundingmember, to work with those property managersthat score highly. He said GRESB members nowrepresents €6.1 trillion in assets, but that whilecoverage was high in Europe at 97%, the challengewas to drive better coverage globally He said GRESBwas working with the world’s largest real estatelobby groups, EPRA and INREV, to produce a set ofcommon sustainability indicators that wouldovercome the hurdle.

Sander Paul van Tongeren, Neal Shegog and Helena Viñes Fiestas


Panel 1Emerging markets: making informed decisions about company/marketquality, researching ESG risks on the ground

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The speakers were Nick Edgerton, SeniorInvestment Analyst at First State Stewart,and Peter Webster, Chief Executive of ESG

research firm EIRIS. The panelwas moderated by and GustavoPimentel, Managing Director ofSITAWI – Finance for Good.Edgerton said investors couldminimise the ESG risks in theemerging markets by taking anactive rather than passive approachand not be taken in by companiesthat purport to be in the businessof renewable energy. Regarding thelatter point, he said: “There are

hundreds of listed companies with the words solar,clean or green in their company name, but wehave yet to invest in any of them. Among them isthe solar company that dumped tonnes of toxic

waste materials into a river system. Or a cleanenergy company that allegedly had apolicy whereby all staff lost theirbonuses if there was more than onepregnancy per department per year.”Webster of EIRIS, which through anetwork of local partnershipsresearches emerging marketcompanies, said that whileresponsible investment still had along way to go, countries werecatching up: “Some are keen to doso, as they increasingly see the value and hencecan attract more investors,” he said. Examplesinclude South Africa, which has become one of the leaders in responsible investment or Mexico,whose companies are increasingly understandingthe importance of corporate social responsibility.

“ There are hundredsof listed companieswith the wordssolar, clean or greenin their companyname, but we haveyet to invest in anyof them . . . ”

“ . . . Among them isthe solar companythat dumped tonnesof toxic wastematerials into ariver system ”

Nick Edgerton, Peter Webster and Gustavo Pimentel


Panel 2Emerging markets: can you trust your investments? Governance and transparency

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The second panel on emerging market investingfeatured a UK pension fund with a huge amount ofexperience in the asset class: RPMI RailPen, the£20bn scheme for the railway industry in Britain.Representing RailPen was Frank Curtiss, Headof Corporate Governance. The panel’s otherspeaker was June Choi, who is a Senior Analystand an expert on South Korea at AxaInvestment Managers. The panel’s moderatorwas Benjamin McCarron, Managing Director,Asia Research and Engagement. Curtiss saidRailPen had been invested in the emerging marketsfor 15 years and has around £2bn invested there,£1.2bn of which is in equities and the rest insovereign debt. The scheme’s biggest exposure is inBrazil and Russia, but Curtiss said that this will shiftmore toward India and China. As to why RailPenhas 10% of its assets in emerging markets, Curtisssaid: “They are an important diversifier and can

offer many potential macroeconomic advantagesthat are attractive to the long term investor.”Investors, however, should be awarethat in many cases their influence islimited, as “controlling shareholdersare a fact of life” in these markets.Choi said that like in developedmarkets, “stock specific factors”explain why an emerging marketstock may or may not perform. However, investors also need to be aware that the countryrisks for emerging markets are higher than thosefor developed markets, and that, hence,fundamental analysis is needed. Choi added that inlooking for good opportunities in the emergingmarkets, investors should not be put off by thepredominance of controlling shareholders or by thefact that many of the firms have the state as ashareholder.

“ controllingshareholders are afact of life ”

June Choi, Frank Curtiss and Benjamin McCarron


Panel 3Engaging with companies on supply chain risk issues

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The speakers were Lauren Smart, ExecutiveDirector at Trucost, the environmentalaccounting company, and James Gifford, formerExecutive Director of the Principles forResponsible Investment (PRI) who has joinedTau Investment Management as a StrategicAdvisor. The panel was moderated by ValeriaPiani, Head of Investor Engagements at thePRI. Smart began the discussion by pointing outthat some companies, for example French luxurygoods maker LMVH, are trying to get a handle onsupply chain risks. In LMVH’s case, the companyasked Trucost to assess the risk of being hit bywater scarcity in its leather, grape and paper supplychains. Using the information provided, thecompany has been better able to cope with scarcityin a particular region by shifting operations toanother. Smart said: “One particular risk for LVMHwas an area in Argentina where a lot of productionwas going on. This was picked up through the useof our metrics but may not have been if more

traditional metrics had been used.” Giffordintroduced the audience to the textile industry, which he describedas one of the most “exploitative andpolluting industries” on the planet.He said that while the industrycarried huge reputational risks,there were also vast opportunities:“This is why Tau think there’s hugepotential for shareholderengagement to improve these(textile) companies,” he said. Anexample, he noted, was thatfollowing the collapse of the RanaPlaza factory in Bangladesh, whichcaused more than 1,000 deaths, acoalition of international investorssucceeded in getting some Westernclothing firms to put pressure onBangladeshi suppliers to improve working conditions.

“ following the collapseof the Rana Plazafactory in Bangladesh,a coalition ofinternational investorssucceeded in gettingsome Western clothingfirms to put pressureon Bangladeshisuppliers to improveworking conditions ”

Lauren Smart, James Gifford and Valeria Piani


Panel 4Corporate tax avoidance: legal and regulatory risks for investors

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The speakers were Edward Mason, Secretary ofthe Ethical Investment Group for the Churchof England, Heather Self, Partner at law firmPinsent Masons and Toby Quantrill, PrincipalAdvisor at Christian Aid, a UK-based charity. The

moderator was journalistAdrienne Margolis, who isFounder and Editor ofLawyers for Better Business.Mason said that the Church ofEngland, which has £5.2bn inassets, very much believes thatcorporate tax avoidance poseshuge investment risks. Disputeswith tax authorities, he said,

could distract from effective management, andregulatory changes could make business modelsunsustainable and negatively impact profits: “Butwe also feel that this is an ethical issue, for tax ispart of the compact between business and society.Society gives benefits to business and tax is part of

businesses acknowledging their responsibilities inreturn,” Mason said, adding that he is confidentthat a crackdown on corporate tax avoidance iscoming. To illustrate how serious the problemcurrently is, Quantrill said Christian Aid believesgovernments are being deprived of $160bn eachyear as a result of corporate tax avoidance.Quantrill cited a recent report from his organisationindicating that 14% of companies listed on theFTSE100 equity index were shielding income insuch tax havens as Switzerland, Luxembourg, HongKong, Bermuda and the Cayman Islands. Self saidcompanies were waking up to the fact that taxavoidance poses a serious risk to their business andthat it was important to maintain the trust ofinvestors. She cited a recent PWC survey in which49% of CEOs said they felt a lack of trust in theirbusiness was hampering their prospects forgrowth. As a result, CEOs are beginning topromote a culture of ethical behaviour, and tax hasa part to play in that, she said.

“ Society gives benefitsto business and tax ispart of businessesacknowledging theirresponsibilities inreturn ”

Adrienne Margolis, Toby Quantrill, Edward Mason and Heather Self

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This wide-ranging panel featured John Howchin,Secretary General, Ethical Council of theSwedish AP Funds, Anne-Catherine Husson-Traore, Chief Executive at Novethic, CEO atSustainalytics and Will Oulton, Global Head ofResponsible Investment at First StateInvestments. The moderator was RajThamotheram, CEO at Preventable Surprises,who asked the panellists to rate whether RI hadmade a difference in recent years. Oulton said therewas more emphasis on the quality of ESG researchagainst 10 years ago when it was “just data”. Butthere was no transparency about what the buy-sidepays for in terms of sell-side research. He said FirstState’s internal RI committee, headed by CEO Mark

Lazberger, is looking at the issue ofcommissions. Oulton also referredto a survey his firm had conductedthat indicated how the RI industryhad become detached from theinvestment case: “We need a slapon the wrist,” he said. Jantzifocused on bribery and corruption,a fundamental topic for which hegave investors: “barely a passing

grade”. He said: “If you don’t get the bribery andcorruption file right, you’re not in a position toaddress some of the big issues. Investors haven’tbeen the driver of this, not fully.” He noted how

regulators were now going after individuals such asin the GSK China bribery case as well asprosecutions by the Canadian authorities in the AirIndia bribery case. As for whistle-blowing, he saidinvestors do care and do ask Sustainalytics about it,noting that for companies: “If you’re not protectingwhistleblowers, it’s a red flag.”

Day 2, Plenary: Is responsible investment (RI) makinga difference?

“ If you don’t get thebribery and corruptionfile right, you’re notin a position toaddress some of thebig issues ”

Anne-Catherine Husson-Traore

Will Oulton

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Asked to reflect on the public’s perception ofresponsible investment, Husson-Traore remarkedhow few people wanted their money to doanything positive, suggesting that there was a lotof work to be done on outlining the social case forsustainable investment. Howchin said there was “alot of momentum” in the area of outlining thesocial purpose of investment within the AP fundsand that they are planning to launch a project onthe subject in the near future. Howchin said itcame down to “what kind of player in society doyou aim to be”. Thamotheram raised the issue ofstructural investment issues holding backresponsible investing, citing benchmarks as aproblem. Howchin said: “Cap-weightedbenchmarks have problems, we know that. I thinkwe have to innovate.”

The Q&A session started off with a probingquestion from Rob Lake on working out thepurpose of RI before being able to articulatewhether it was making a difference. Oultoncountered by saying the issue really was about thepurpose of asset management and the capitalmarkets in broader society. Jantzi felt RI could bedefined as ‘stewardship’ in the sense of assisting

savers in both financial returns and a better qualityof life. Husson-Traore said RI was about improvingthe environmental and social consequences of themarket and therefore measuring the success of RIwas a constant not an end in itself.

Day 2, Plenary: Is responsible investment (RI) making a difference?

John Howchin, Raj Thamotheram and Michael Jantzi

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The second keynote address at RI Europe wasgiven by Nick Robins, who last January joinedthe United Nations Environment Programme(UNEP) as a Co-Director of the new “Inquiryinto the Design of a Sustainable FinancialSystem.” Prior to joining UNEP, Robins was Headof HSBC’s Climate Change Centre for seven years.

Robins said his task at UNEP wasto devise policy options that linktwo objectives that, until now,had been treated separately –namely financial reform and theswitch to a sustainable or “green”economy. Assisting Robins atUNEP in Geneva is Simon Zadek, aSenior Fellow of the Global GreenGrowth Institute and MahenauAgha, a UNEP Advisor. Robinssaid: “If you look at the mainmacroeconomic indicators, we’re

not making enough progress. We’re heading in thewrong direction in terms of climate change. Whilethere’s great work being done by Sean Kidney(Head of the NGO Climate Bonds Initiative) and

others in promoting green bonds, it’s notenough.” He added: “If we look at the financialreform that has take place – some would call it atsunami – you will look in vain for regulation thatactually is incorporating sustainability factors. BasleIII and Solvency II are just two examples.” UNEPExecutive Director Achim Steiner has given Robinsand his team until the middle of 2015 to, as heput it, “advance policy options that deliver a stepchange in the financial system’s effectiveness inmobilising capital towards a green and inclusiveeconomy.” As to why UNEP is focusing on thefinancial industry instead of say the energy ortransport industry, Robins said one reason had towith “market imperfections, inefficiencies andfrankly failures that prevent the industry’s actorsfrom properly dealing with environmental andsocial issues.” Another reason was the importanceof policy coherence: “We’ve seen a number ofpolicy reforms since the financial crisis, and whilethey were necessary and well-intentioned, theytook no account of long-term financing andsustainability needs,” he added.

Day 2, Keynote Address: “In search of policy innovations for a green economy”

Nick Robins

“ If you look at themain macroeconomicindicators, we’re notmaking enoughprogress. We’reheading in the wrongdirection in terms ofclimate change ”

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Robins joined RI’s Europe’s final plenary session,with the other speakers: Gavin Templeton, Headof Sustainable Finance at the UK’s GreenInvestment Bank; Mark Mansley, ChiefInvestment Officer of the £2.3bn (€2.9bn)Environment Agency Pension Fund (EAPF) andDonald MacDonald, Chairman of theInstitutional Investors Group on ClimateChange (IIGCC), which represents 88 bigEuropean investors with €7.5btrn in assetsbetween them. RI Managing Editor HughWheelan moderated the panel. Templeton startedby explaining the Green Investment Bank’scontribution to the UK government’s efforts tomake the domestic economy greener. According toTempleton, over the last 20 months, the bank hasprovided £1.3bn in financing for projects such asoffshore wind power, waste management andenergy efficiency and that its activity, in turn, hasspurred three times as much in private investment:“We like to think of ourselves as pathfinders. Wewant to show investors that if you, like us, want tobe profitable, you don’t have to compromise onthe green.” However, Templeton also said thatanother £17bn in domestic investment was neededeach year for the next six years for the UK economy

to become green by 2020. Another investormaking an impressive contribution in the effort togreen the UK economy is the EAPF. According toMansley, the scheme has 25% of its assets investedin either green projects or companies it considersenvironmentally friendly. Of theportion, listed equity accounts forthe largest share, followed byprivate equity investments in cleantechnology, green properties andsome green bonds. Regardinggreen infrastructure, Mansley saidthat while the EAPF was minimallyexposed to it, it wanted to havebetween 5 and 10% of all its assetsin the space over the long term:“Infrastructure is what we’relooking to push into. That’sbecause, theoretically, it offers low risk and goodincome flow,” he said. “However, in practice, thingsare a lot different. We, for example, are having ahard time finding infrastructure funds that arereally green. Instead, you find pipelines or airports,mixed in with say clean tech.” Another problem, he

Day 2, Plenary Two: Working with governments anddevelopment agency funds for targeted investments:large-scale environmental financing and infrastructurefunds and social project investment

Mark Mansley

Gavin Templeton

“ We like to think ofourselves aspathfinders. We wantto show investorsthat if you, like us,want to be profitable,you don’t have tocompromise on thegreen ”

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said, was the tendency of infrastructure funds torely on leverage to maximise return, something thatthe EAPF would, owing to the risks, prefer to avoid,he added.

Taking Europe as a whole, MacDonald cited anestimate from the Paris-based International EnergyAgency (IEA) whereby power needs would increaseby 100GW over the next ten years. In order to meetthat demand, European governments would haveto mobilised $2.2trn worth of investment: “That isa huge amount of money. But it’s also a hugeopportunity for investors to play a major role in thetransition to a low-carbon economy.” However, healso said that to encourage more investment frompension schemes, for example, Europeanpolicymakers had to appreciate their particularneeds: namely risk-aversion and long-term cashgeneration. The IIGCC was working to educatethem in this regard, he added.

Day 2, Plenary Two: Working with governments anddevelopment agency funds for targeted investments: large-scale environmental financing and infrastructurefunds and social project investment

Donald MacDonald, Mark Mansley, Gavin Templeton, Nick Robins and Hugh Wheelan

The awards for best Responsible Investment Report 2014 were made at the RI Europe 2014 conference in London

OVERVIEW:The RI Reporting Awards showcase excellence in responsible investment and ESG reporting, encouragingbest practice and transparency by recognising the highest standards in the disclosure of responsible investmentactivities by asset owners globally. Public disclosure, accountability and transparency enhance the credibility ofresponsible investment, leading to higher standards. Using publicly available information, our judging faculty(below) looked for reporting best practice in terms of simplicity, relevance, disclosure and process.

Best RI Report – Large Funds, Joint Winners ABP Folksam

Best RI Report – Medium & Small Funds Folketrygdfondet

Best RI Report – Large Funds CPPIB GEPF

Best RI Report – Medium & Small Funds Bâtirente Fonds de solidarité FTQ

The winning and commended reports were drawn from a short list of nominated reports announced on 15th April 2014.

Best RI Report – Large FundsABP, NetherlandsCDC, FranceCPPIB, CanadaFolksam, SwedenFutureFund, AustraliaGEPF, South AfricaKLP, NorwayPSP Investments, CanadaStorebrand, Norway

Best RI Report – Medium & Small Funds AP6, Sweden Batirente, Canada CBUS, Australia FMO, Netherlands Folketrygdfondet, Norway FTQ, Canada HESTA, Australia New Zealand Super, New Zealand OPTrust, Canada VicSuper, Australia

* Large funds / medium & small funds are defined by assets under management above / below €25 billion.

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The Winners and Commendations

for Best RI Report 2014

Organised by: Sponsored by Research Partner:

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Joint Winner:Best RI Report – Large FundsABP

• A first-class report.• Passion and thought leadership are clearly

demonstrated throughout report.• They do not shy away from discussing ethical

dilemmas.• The report was very detailed and gave some

great examples across a multitude of assetclasses.

• There is clear indication of RIintegration from the strategic leveldown to the day-to-dayimplementation.

• The transparency was a particularstrength in terms of futureadvocacy and influencing other

institutional investors and the companiesthemselves.

• Great to see disclosures of engagement, votingand exclusions.

Joint Winner:Best RI Report – Large FundsFolksam

• Provides an elaborate overview of its sustainabilitypractices, both at the company and theinvestment management level.

• Strong commitment to RI in CEOaddress.

• Clear layout with goals and RImilestones.

• Good commitment: “All assetsmanaged are covered by ethicalinvestment criteria”.

• Successful use of (audited) GRI framework whichadded to the transparency and clarity provided ina clear report.

• In a world of poor trust in financial entities, thefocus on “what customers say” is best practice.

• The two in depth profiles of engagement give asense of its role as an activist investor.

• They have the courage to also mention negativeexperiences.

Judges’ Comments: Large Funds

“ They do not shyaway fromdiscussing ethicaldilemmas ”

“ All assets managedae covered byethical investmentcriteria ”

Lody Geerst, Vice Chairman of the Board of ABPreceives the award from Matt Christensen,Global Head of Responsible Investment, AXAInvestment Managers

Susanne Sjödin-Svensson, Counsel, Folksamreceiving the award from Matt Christensen

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Commended: Best RI Report – Large FundsCPPIB, Canada

• Clear statement of RI principlesfrom the start, well laid out andeasy to follow.

• CPPIB manages to communicateits ESG efforts attractively in acomplete and concise way.

• Included a definition ofresponsible investment at CPPIBrather than relying on genericindustry definitions.

• Clarity of principles throughout and goodexamples, with data to back up the delivery of RIobjectives.

• They report on their priorities and their focusareas for engagement, showing the reader whatthey find most important.

.

Commended:Best RI Report – Large FundsGEPF

• Strong integration of RI throughout this AnnualReport and Accounts, this being significant inthat it wasn't an isolated RI report.

• The strongest aspects of this report are the clarityof its commitment to responsible investment andto economic development in SouthAfrica and Africa more generally.

• The case studies showedassertiveness through leadershipand examples of principles inpractice.

• Illustrates unbelievable stakeholderengagement.

• GEPF's values shine through thereport, and the prominent role ESGplays in their investment decision-making.

Judges’ Comments: Large Funds

“ CPPIB managesto communicateits ESG effortsattractively in acomplete andconcise way” “ The case studies

showedassertivenessthrough leadershipand examples ofprinciples inpractice”

Stephanie Leaist, Vice-President, SustainableInvesting, Canada Pension Plan InvestmentBoard receives the award

Matt Christensen presents the award to RenosiMokate, Chairperson of GEPF

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Winner: Best RI Report – Medium & Small FundsFolketrygdfondet

• Really strong framework for reporting: thoroughand detailed.

• Clear concise report which expresses work inprogress, and problems as well as successes.

• Strong evidence of fiduciary dutywith financial success and buildingtrust with stakeholders.

• Admired the articulation of issuesto do with proxy voting agents.

• Good explanation of their specificmandate and responsibilities.

• Its engagement report is extensive and thorough.

• A very comprehensive overview for its readership.The CO2 analysis of their portfolio is verytransparent.

Judges’ Comments: Medium & Small Funds

“ Really strongframework forreporting: thoroughand detailed”

Melanie Brooks, Senior RI Analyst,Folketrygdfondet receives the award from MattChristensen, Global Head of ResponsibleInvestment, AXA Investment Managers

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Commended: Best RI Report – Medium & Small FundsBâtirente

• Outstanding report.• Passion for RI followed up with clear examples

including the outcomes.• Strong integration between

financials, responsible investmentand their own sustainability.

• Engaging and eye-catching layout.

• The table of ESG engagementsprovided a transparent list ofcompanies targeted.

• A strong visual overview of ESG issues that caneasily be digested by the reader.

Commended:Best RI Report – Medium & Small FundsFonds de solidarité FTQ

• The report is clear on its missionand equates that with responsibleinvestment.

• This is a clear, focused andconvincing report for a pensionfund with an unusual and wellexecuted approach to responsibleinvestment which is totallyintegrated into its daily practice.

• A report that showed RI highly integrated.• Clear, purposeful links to objectives and

principles of GRI, Global Compact and UNPRI.• Engaging and influencing through ease of

navigation using colour schemes to delineatebetween key topics.

• Highlighting the best of GRI compliant reportingvia info-graphics.

• Analysis of the past, follow-up and futureobjectives provide good platform for continuity.

Judges’ Comments: Medium & Small Funds

“ Passion for RIfollowed up withclear examplesincluding theoutcomes.”

“ Clear, purposefullinks to objectivesand principles ofGRI, GlobalCompact andUNPRI.”

Helene Winch, Director of Policy and Research atPRI receives the awardon behalf of Bâtirente

Matt Christensen presents the award to MichaelJantzi, CEO of Sustainalytics who receives it onbehalf of fonds de solidarité FTQ

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The RI Reporting Awards - now in their second year - showcase excellence in responsible investment andESG reporting, encouraging best practice and transparency by recognising the highest standards in thedisclosure of responsible investment activities by asset owners globally. Public disclosure, accountability andtransparency enhance the credibility of responsible investment, leading to higher standards. Using publiclyavailable information, our judging faculty (following pages) looks for reporting best practice in terms ofsimplicity, relevance, disclosure and process.

The two awards for Best RI Report 2014 – one for Large Funds with AUM greater than €25bn and another forMedium & Small Funds with AUM less than €25bn – were announced at the RI Europe conference in Londonon 4th June

The RI Reporting Awards are based on proprietary research of more than 1,000 funds around the world tocreate a pool of RI reports to which a series of objective indicators are applied to filter the reports into twoshortlists of nominated reports. Download the objective indicators at – www.responsible-investor.com/images/uploads/reports/RI_Awards_Criteria_2014.pdf

The RI Reporting Awards are organised by Responsible Investor in association with our research partner theResponsible Finance Research Charity.

Overview:• Research 1,000+ funds to create a pool of RI reports• Split the pool into two categories of Large and Medium & Small funds• Apply objective indicators to filter the reports into two long lists of nominated reportYou can download a copy

of the objective indicators here www.responsible-investor.com/images/uploads/reports/RI_Awards_Criteria_2014.pdf

• The Judging Panel (below) then ranks the nominated reports• The rankings are aggregated to create two short lists of commended reports• The two awards for Best RI Report 2014 are announced at RI Europe in London on Wednesday 4th JuneLink to further information about RI Europe 2014 at www.responsible-investor.com/europe2014

Research: (January To March)The research is supervised by Agnes Neher, PhD candidate, University of Hohenheim and Vice President, ReFineResearch Charity with guidance from Dr. Andreas G. F. Hoepner, Associate Professor of Finance, ICMA Centre, HenleyBusiness School; Senior Academic Fellow, United Nations backed Principles for Responsible Investment; and President,ReFine Research Charity. Hugh Wheelan, Managing Editor, Responsible Investor, also provides oversight and guidanceto the entire research process. Using public sources we search the web sites of more than 1,000 funds globally toascertain whether they publish an annual report or related reporting on responsible investment activities.

Ranking & Judging: (April)The content of these reports is then analysed and filtered according to our objective indicators to create two longlists of funds, which are nominated for consideration by our judging panel. Each of the judges is then given a copyof all the nominated reports. The judges are asked to rank each category (Large and Medium & Small), including ashort comment on each report. The judges then pass their rankings back to the research team who aggregate thescores to create a short list of three commended reports in each category.

Process and Timeline:


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The Judges (A-Z):• James Gifford, Senior Fellow, Initiative for Responsible Investment, Harvard

• Dr. Andreas G. F. Hoepner, Associate Professor of Finance, ICMA Centre, Henley Business School; Senior Academic Fellow, United Nations backed Principles for ResponsibleInvestment (UK)

• Marcel Jeucken, Head of Responsible Investment, PGGM Investments(Winners, Best RI Report by a Large Fund 2013)

• Steve Lydenberg, Partner, Domini Social Investments (USA)• Dawn Turner, Head of Environmental Finance and Fund Management,

The Environment Agency Pension Fund (Winners, Best RI Report by a Medium & Small Fund 2013) • Hugh Wheelan, Managing Editor, Responsible Investor (UK)• Helene Winch, Director of Policy and Research, PRI

(former Head of Policy at UK’s GBP26bn BT Pension Scheme Management)

Researcher:• Agnes Neher, PhD candidate, University of Hohenheim and Vice President,

ReFine Research Charity

About Responsible Investor:Launched June 2007, Responsible Investor (RI) is the only dedicated news service reporting on responsible investment,ESG (environmental, social and governance) and sustainable finance for institutional investors globally. ResponsibleInvestor also organizes a series of highly successful conferences focusing on how investors integrate RI and ESGfactors into their investment analysis and decision-making processes: RI Asia, RI Europe and RI Americas, seewww.responsible-investor.com/

About Refine Research:Responsible Finance Research (ReFineResearch) is a charitable institution which supports and leverages academic andindustry research in the area of responsible investment. The charity aims to achieve deeper knowledge of responsibleinvesting through innovative thinking, greater transparency and advanced research methods. Anybody with similarinterests is welcome to join the charity.

Process and Timeline:


Documents

Conference Report - Responsible Investor · PDF fileIt was moderated by Rob Lake of Rob Lake Advisors. Lake pointed to the “plethora” of long- ... RI EUROPE 2014 CONFERENCE REPORT