The €33.8bn ($49.5bn) French pensions reserve fund (FRR) is in the process of defining a strategy on climate change that will likely include investments in cleantech funds, FRR executive board member, Antoine de Salins told delegates at the TBLI European conference in Paris last week.
The affirmation was one of a number of accounts at the TBLI conference suggesting expectations are growing for institutions to be responsible on issues such as climate change. The FRR, which is a signatory of the UN Principles on Responsible Investment, already has about €600m invested in SRI mandates with five asset managers, which it has indicated will be an initial allocation to responsible investment.
De Salins said that at a recent meeting of the world’s biggest pension funds and corporations in London there was an active discussion on environmental, social and governance (ESG) issues: The chief executive officers of the corporations present said they now spent at least 10% of their time on ESG issues. I think this demonstrates clearly that times are changing.”
Rob Lake, senior portfolio manager for ESG issues at ABP, the €218bn Dutch pension fund, said one issue that leading pension funds are encountering is a lack of suitable product in areas of sustainability that ispackaged well enough for institutions to invest in. Funds making responsible commitments, he said, were often required to spend more time researching smaller investments. As an example, he said ABP had a €20m investment in microfinance, which took the same due diligence time as for an equity fund of €250m. Asked whether ABP could be interested in partnering with third parties such as non-governmental organisations for such investment projects, Lake said the fund had already done so for investment in an €60m forestry fund run in conjunction with the Church of Sweden that will invest in tree planting projects in Mozambique: “It’s absolutely possible that we will partner up in more initiatives of this type and we would like to see more opportunities coming to us.”
Regarding the issue of whether ESG criteria could improve fund performance, Lake said ABP was starting from simple principles as it begins to screen its entire €218bn portfolio: “We are asking our portfolio managers whether ESG is useful in adding value to the portfolio, then we can work out how we can quantify and incorporate those findings if the correlation is positive.”
The amount of institutional money now invested in SRI prompted Lake to say that it was no longer a niche
discipline and that there could be a potential breach of fiduciary duty for schemes not to examine ESG issues.
Amy Muska O’Brien, director of social investing at TIAA-Cref, the $437bn US pension manager for teachers and academics said its responsible investment approach aligned it with the concerns of its members, which it had surveyed to gauge their views on the topic.
TIAA–CREF now runs more than $9.5bn in social screening, community investing and sustainable real estate funds and has a large team involved in advocacy and corporate engagement: “We believe that responsibility is crucial to our role as a long-term investor and that governance and monitoring is better for long-term returns. Our members expect it and so does society.“ESG Leaders Awards
The TBLI Paris conference was the venue for the first ESG leaders awards produced in conjunction with IPE Magazine.
The winner for the best ESG investor was the UK’s Environment Agency Pension Fund for its €2.15bn ESG overlay strategy, which since its inception in 2005 has produced above benchmark performance.
F&C Asset Management won the award for Best Asset Manager Investing in ESG, while Goldman Sachs won the award for most innovative development related to ESG for its Environmental Policy Framework. The award for best research company went to Innovest Strategic Value Advisors, while KLD Research & Analytics won the award for outstanding contribution to ESG.