Wealth Management

RESPONSIBLE INVESTING AND ESG: WHAT GETS MEASURED GETS MANAGED

By
Adrian Howard
on
October 20, 2021

Companies should use accepted reporting frameworks and produce dedicated annual sustainability reports so that it’s easy to assess their environmental impact. St. James's Place uses these reports alongside our fund manager’s engagement work to ensure we invest your money responsibly and maintain pressure on companies to set and meet ESG targets. Our reporting on our portfolios enables you to understand the impact your investments can have.

Most investors want to help the environment. But some companies have exaggerated what they do in this area, known as greenwashing. In response, investors are demanding more and better information.

To avoid accusations of greenwashing, companies must be fully transparent about their environmental impact and their actions to mitigate it.

Financial advisers and fund managers play a key role by scrutinising each company’s activities and reports; setting environmental targets, such as net zero carbon emissions; and holding companies to those targets.

St. James's Place aims to lead in this area, because it’s right and because we know our clients expect it.

To make sure companies ‘walk the talk’, we look for transparent measurement and communication of environmental, social and governance (ESG) practices and outcomes. This includes using accepted reporting frameworks and publishing the information in dedicated annual sustainability reports.

ESG disclosures from companies have got better in recent years through frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), which improves and increases reporting on climate-related issues; and the Global Reporting Initiative (GRI), which also covers social issues such as worker’s rights and corruption.

Many companies produce annual sustainability reports that detail all this information. This makes it easier for investors to access it quickly and monitor yearly progress.

Why measure ESG?

But we need more. The impacts of climate change have become critical. A 1°C global temperature rise is causing climate breakdown and damage to humans, animals and ecosystems. Four of the five most likely risks identified by global business leaders are environmental (1). Without urgent action, these effects will worsen.

But promoting a sustainable economy brings many investment opportunities, too.

Investors need clear, high-quality information to assess the risks and opportunities related to climate change and other ESG issues. Initiatives such as TCFD and GRI provide a framework for firms to report these.

St. James's Place aims to use all this information, together with our fund manager’s engagements with companies, to make sure the money we invest responsibly on your behalf has the desired impact.

We have also worked with market researcher The Wisdom Council to understand how you feel about responsible investing. The research highlighted that our clients’ deep environmental concerns remain a priority, and you expect leading brands such as ours to incorporate sustainable practices into our business (2).

Walking our talk

Engagement is a powerful way to maximise our influence and make a real difference. St. James's Place has appointed Robeco as our responsible investment engagement partner to enter into dialogue with investee companies on ESG issues and sustainability risks and opportunities. This enables us to advocate for real change on behalf of our clients.

We are also taking several urgent actions on climate change. We have signed up to the UN-supported Principles for Responsible Investment (PRI), a network of investors that works to promote sustainable investment. And we have become members of the Net-Zero Asset Owner Alliance (NZAOA) to join other investors in influencing an economy-wide transition towards net zero by 2050 or sooner.

We have also started disclosing our climate-related risks through our TCFD report.

And we have started communicating the carbon emissions of all our Growth, Income and InRetirement Portfolios, in a dedicated portfolio carbon emissions report. This is a key step towards lowering the environmental impact in our portfolios and helping you understand the impact your money can have.

You can make a difference

Our 2021 Portfolio Carbon Emissions Report discloses the carbon footprint of companies as a proportion of revenue, and shows how our portfolios compare against the industry. (All our portfolios are below their benchmarks, with the Adventurous portfolio the lowest at -42%.)

Petra Lee, Responsible Investment Consultant at St. James's Place, says: “What gets measured gets managed. By reporting the carbon footprint of our portfolios, we can identify risks and highlight opportunities for change.

“We will continue to align our portfolios against science-based targets to mitigate the harmful effects of climate change. This helps us use money as a force for good, and it makes investment sense.”

Amelia James, Head of Environmental Strategy at St. James's Place, says: “We want to lead the transition to a low-carbon economy. To ensure our environmental strategy is effective, we have embedded it throughout our culture, financial model and strategy. That makes sure we back up all our statements with actions.”

Many advisory clients are still not clear whether they can invest their money to tackle environmental challenges. But these actions help show you can make a difference through your investments. TCFD and our other reports and disclosures are a catalyst and will maintain pressure on all the fund managers we work with, who in turn will pressure the companies they invest in, creating a snowball effect.

The St. James's Place responsible investing page and TCFD report help clients explore these subjects further and show how you can benefit from the opportunities in a sustainable, low-carbon economy.

Our world is changing faster than anyone predicted. We believe responsible investing has a huge role to play in shaping a better world and building a sustainable future.

Past performance is not indicative of future performance.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Sources

1 The Global Risks Report 2021, 16th edition, World Economic Forum

2 Responsible Investment 2020, St. James's Place and The Wisdom Council, January 2021, total sample size: 2,067 adults