Established in 2014, the Fund Operations Summit continued in 2019 as an independent, senior level forum focused on investment operations and outsourcing for key asset owners, insurers and asset managers. The agenda was geared towards chief operating and financial officers, heads of investment operations and related senior staff with an interest in Asset Owner or Asset Management relevant topics with over 160 professionals from Australia, Asia, Europe and North America in attendance. With many sessions focused on enhanced investment outcomes forSuper Fund membersit was not surprising that increased member engagement around ESG matters was also a prominent topic amongst Asset Owners and Managers alike.
A panel session considered ESG in the context of the Australian Superannuation industry. The panel comprised representatives from the investment consulting industry, two Responsible Investment fund managers and a super fund representative.
Some interesting observations:
From a historical perspective, what today is known asResponsible Investinggrew out of religious organizations tasked with deploying capital on ethical grounds. Post-Enron, many investors looked to focus onGovernance mattersIt was becoming clearer that company values were impacted by poor environmental, social or governance matters, hence ESG becoming an area of enhanced focus.
Recently APRA, the Australian pension, insurance and banking regulator published a paper onClimate Change:Awareness to action. The panel commented that investors may seek litigation and regulators may takeenforcement actionfor “not considering to failing to respond” to the issues of climate risk.
Key themescommunicated to portfolio companies were consistently:
Health and Safety
Diversity and Inclusion
Investors cautioned on ongoingGreenwashing issues; with examples of Fund Managers retrofitting portfolios to matchSustainable Development Goals.
The panel highlighted theModern Slavery legislationenacted in Australia (and more stringently in New South Wales at a state level) and theEU Sustainable Development Goalsas global examples of regulatory change.
On ESG investment matters, it was noted that Super Funds were seeking “sustainable long term returns” and that some Supers investment professionals had KPIs linked to PRI Assessments.
In terms of responsible investing, it was now seen as “if not, why not” as to whether investors were considering ESG metrics.
One of the Fund Managers on the panel commented that having blanket requirements forESG ratingscould have unintended consequences, particularlyAsian smaller companieswho don’t tend to have an ESG rating, even if they are working.
Good governancewas reinforced as a primary factor in stock selection.
Overall, investors were encouraged to maintain strongDue Diligenceon ESG matters.
With increased focus on Investment Governance, Due Diligence and ESG matters the topics at the Fund summit were extremely relevant not only to Castle Hall but also to the other attendees present. We would also like to thank publisher Fund Business for a well-organized event!