Nick Spooner and Sarah Clements, Grantham Institute and Imperial College Business School Master’s students studying Climate Change, Management and Finance, dive into the question of responsible financial investments, and ask whether it’s time to make some changes?
Significant progress has been made since writing our previous piece on responsible investment at Imperial. Last week we launched our Responsible Investment Club by co-hosting an event with the Grantham Institute, which discussed the impact of climate change on financial markets, and how investors could best prepare for these macroeconomic changes.
We were astounded by the response from both students and industry figures in this space, who were kindly offering us advice and support with our initiative. It was particularly fascinating to see the range of professionals that the event attracted – from those involved in the fossil fuel industry, to members of global development banks and government representatives.
Speaking on the panel were Mark Campanale (Carbon Tracker Initiative), Seb Beloe (WHEB Group), Michele Giddens (Bridges Fund Management) and Meryam Omi (Legal & General Investment Management), moderated by Guy Turner (Trove Research).
We particularly liked Mark’s positive outlook on the influence of technology disruption, instructing investors to ‘expect the unexpected’ with regard to electrification of the energy system – demonstrated by his anecdote of Easter Parade on Fifth Avenue (New York) in 1990, which witnessed a rapid change from the clopping of horses’ hooves to the throttle of a combustion engine in just 13 years.
Bridges Fund Management, founded by Michele, is an early stage investment firm that has a strong focus on social impact. She emphasised that responsible investment is an attractive opportunity which did not sacrifice financial returns, and that the key challenge was mainstreaming demand from investors for such products. Conversely, Seb of WHEB Group uses a thematic approach that utilises ESG factors [Environmental, Social and Governance] to identify investment opportunities. The outperformance of WHEB group over the last five years highlights the success of this responsible investment strategy. Finally, Meryam described her role as Head of Sustainability at Legal & General, with particular note of the recently established Future World Fund. She was passionate about the need for changes in the current framework of pension allocation, suggesting the low-carbon option ought to be considered the default. Her experience in engaging with major investors has reaffirmed the notion that by not taking a stance and allowing investment to continue along the business as usual trajectory, individuals are making an active decision.
After the success of the event, we were motivated to meet with Muir Sanderson, the Chief Financial Officer of Imperial’s endowment fund, and the Head of Financial Strategy, to talk about the work we conducted in founding the Responsible Investment Club. We discussed investment strategies, measures of success and the priorities for enhancing the fund. Having spoken to so many professionals who have such progressive approaches to the financial merit of ESG integration, it was interesting to have our view really challenged by someone in charge of such a prestigious fund, and the meeting was a great experience for us.
Our priorities from the meeting were to find out more about how Imperial’s investments are managed (you can find details on their portfolio here) and to begin the dialogue of responsible investment with its Board. Of course, the Board is strictly focused on the risk/return profile of the fund, but Muir was interested in considering any factors able to enhance its performance.
We will be putting together some evidence of where ESG strategies have out-performed on return on investment for the board to review in the coming weeks, and welcome any support and advice in constructing a strategy for Imperial’s investments. Feel free to email us at email@example.com – we look forward to hearing from you.