Speaker 0:
joining me now at the Bait Winter Conference. Kenny Robertson, head of client portfolio management. Sustainable investing as well as head of quantitative equity portfolio Management from Welcome to you both. Thank you. Thank you for having us. So you've just come off of your, uh, your, um break away sessions discussing E g regulation. Tell me,

Speaker 0:
how do you integrate and sustainable investing into your investment process that

Speaker 1:
so we take a multi dimensional approach. So we take different elements we take into account also sustainable development goals environmental footprints such as carbon reduction, water use, waste generation and also explosions. And we combine that into

Speaker 1:
our portfolios. So

Speaker 0:
can you. Perhaps you can elaborate for us how the T c f d and the N F D now most recently have supported your quant of analysis. Perhaps you can Yeah. So I think when we look at e g when we look at SI, disclosure is obviously a huge part of this. We need the data. Wilma needs the data before she can integrate into her.

Speaker 0:
Um, So I think both frameworks have been positive, and I think it actually speaks to something wider. Because if you look at the last five years, say, of sustainable investing. We've made a lot of progress on climate change in terms of disclosure standards, data, um, engagement platforms, climate action 100 Plus these sort of things. Um, but actually, we need to start replicating that on other topics and in particular biodiversity,

Speaker 0:
because we're about 10 years behind where we are on climate with biodiversity, and we need to catch up soon. So that's where you know, the t c f DC becoming the t n f D. Um, Climate action 100 becoming nature action 100 so that we can start replicating this. Take all the lessons we

Speaker 0:
learn on climate and really move it forward. Absolutely. OK, perhaps you can also comment on the multidimensional approach that you have to. Yeah, so? So I think there are many different building blocks that we use in in any process, whether it be equity fixed income, whether it be quant fundamental. Um, you know, you can start with a a sort of screen of your universe. Um, so it's an exclusion policy. Um, and then depending on where you want to go,

Speaker 0:
that that dictates your next step. So we have e s g integration as a standard across all of our portfolios. That's not something we can turn off. Um, but from there, you can if you want to go, for example, more on the climate side, you know, we can do everything from, uh, you know, better than benchmark carbon target to to full Paris alignment.

Speaker 0:
Um, we can do the same on on E. S G. We can do the same on on waste and water. And most recently, um, you know, something we've been developing over the last five years, We can also do the same on S. D. G s. So if you really want to take that extra dimension and it moves slightly towards impact, you can actually start and we can start. And Wilma runs these portfolios and tilting portfolios on specific S. D. G. S and doing a number of different things there. So it really is multidimensional. Absolutely. So perhaps you can

Speaker 0:
with regards to how you integrate addressing the United Nations sustainability development goals, your investment

Speaker 1:
allocation so we can do this in multiple ways, actually will be developed. We developed our own proprietary framework, which is back to that and we score every company on the sustainable development. Goals and discourse range from minus 3 to 3. And what we do is that we can either exclude companies on. So this means that we can

Speaker 1:
exclude the ones that contribute most negatively to the S g s or we give more weight to those that score positively on the S C G. That can be on the total. So basically the combined score on all the S G together or it can be on a specific selection of S E G. So this is also dependent on the objectives of the clients.

Speaker 0:
So then how is sustainability a predictive metric for future stock?

Speaker 1:
Yeah, So we actually use multiple signals to predict future stock returns related to the social or environmental or governance dimension. Maybe to give you an example in the area of social is that we look at employee engagements. So basically, the idea is that companies with happy employees and they are more motivated

Speaker 1:
and are also more efficient, and we can actually measure that. We also observe that these type of companies have higher sales output compared to the basically the salary payments, and also that leads to future stock returns. And what's nice about this metric is that it both contributes to predicting assets, but also actually contributes to the social dimension of

Speaker 0:
So can you. Perhaps you can elaborate with regards to how asset manager engagement with regards to E s G integration, then be quantified as well through their proxy voting. Yeah, it's a great question. And I think when we look at the role that investors play in creating impact, um, we really need to be taking seriously the role of engagement and voting.

Speaker 0:
Um, so in terms of our process, we engage roughly about 250 names each year within our portfolios, Um, and really to drive them to do better on specific um E s G issue that we've identified. Um, now that's something that we've done since 2005 when we set up our engagement team, and we really see that as the key way in which we can create impact. Divestment is very easy, very easy, but it's also a transfer of ownership,

Speaker 0:
so we feel that engagement actually needs to be that first tool. Um, and the first tool that we use will engage typically for up to three years. And if we see that, we don't see progress in that time. Um then divestment come, come can come into play. But it's really about engagement first and foremost. And I know Wilma also, um, actually looked at the role of the role of proxy voting by managers.

Speaker 1:
Yeah, indeed. And we found that

Speaker 1:
there is quite a big difference in how managers vote particularly related to sustainability topics. So we found that actually, the majority of the managers we did this research on US asset managers because they are obliged to record their voting records. And we found that the majority actually vote against the sustainability proposals, which is of course, quite interesting in these times. So you can actually, if you evaluate your

Speaker 1:
managers, you can also have a look at. You know which managers do actually vote most often against or in favour of these proposals. And our research shows that, especially the more larger managers, they most often vote against that. But it's good to check this in advance, So

Speaker 0:
I want to just to close up the session, just get from both of you. What are some of the key takeaways with regards to this year's conference conference? Of course. And what are you taking home with you?

Speaker 1:
Yeah. So actually, I think this conference again emphasised that investors have their own objectives and their own wishes with respect to sustainability, their own beliefs. Also, while some might be focusing more on environmental topics, others might be more related to social topics. And

Speaker 1:
I think therefore, it is also very important that if you invest in strategies as an investor, that you search for a strategy that fits your needs and for asset managers is therefore very important to also match those different needs. So basically, I think that customization is an important keyword here,

Speaker 1:
and we also therefore like to co found the strategies together with our investors to really build a strategy that fits their objectives and also, if they change to then also change that process accordingly.

Speaker 0:
I think for me the big takeaway is we've had so many engagements, so many discussions around sustainability, which I think is really exciting.

Speaker 0:
And I think if trustees and principal officers and and everyone in the kind of wider ecosystem is actually taking these questions to managers asking these questions, asking them to push to push more. Um, then I think there's a great future ahead of us on that positive note. I want to thank you both for sharing your insights into We appreciate your time.

Speaker 1:
Thanks a lot.