Has the ESG vs. fiduciary duty debate turned its final corner?
BY Staff | October 31, 2019
A plethora of overlapping terms can make a conversation about responsible investing something of a minefield.
While there are many terms that are used interchangeably, there are slight differences to them, said Liza McDonald, head of responsible investment at First State Super, in a video series hosted by Willis Towers Watson’s Thinking Ahead Institute. For First State Super the term socially-responsible investing is more focused on screening, whereas impact investing is focused on the positive impact that investments are making, she noted.
At First State Super, investing responsibly means integrating environmental, social and governance considerations throughout the investment process. “We see ourselves as a responsible owner and that means integrating environmental and social [and] governance factors into our investment process. We’re long-term investors and we’re looking at investing for the long-term sustainability to deliver retirement outcomes for our members,” McDonald said.
McDonald, along with John Green, co-chief executive officer or Investec Asset Management also discussed the relationship between fiduciary duty and responsible investing.
“Our primary purpose is to deliver retirement outcomes for our members,” she said. “And the way we do think about that is how we allocate our capital does have an impact to our member’s retirement, but it can also have an impact on the community and the environment which our member is retiring to. So with that comes a sense of purpose around ensuring we are investing sustainable and that we are looking at the broader risks and opportunities that we can deliver to our members.”
Originally, there were discussions about whether investing responsibly conflicts with fiduciary duty, but these conversations have shifted, Green said.
Now the belief that plans can consider sustainability factors and deliver returns has become mainstream, he said, noting the conversation has arguably moved to the opposite end of the spectrum where in certain areas like climate change there’s a premium to invest.
“There’s going to be a premium return in the coming years,” Green added. “So for example the concept of a decarbonization premium is something that is now becoming a mainstream conversation and I think needs to be taken very seriously.”