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Mike Tyrrell: From biscuits to bytes … Reflections on RI Europe 2018

Taking stock of what has happened in sustainable investment — and considering what’s needed

The run-up to the annual RI Europe conference (this month) always presents an excellent opportunity to take stock of what has happened in sustainable investment over the previous year and to consider what’s needed in the year ahead. As ever, Hugh Wheelan wrote a challenging piece (What’s behind the explosion…?) and I identified five questions ahead of RI Europe.
As ever, the conference was a busy and engaging mixture of seasoned practitioners and industry newcomers and comprised both the mega-brands of finance (mainstreaming is happening) and some sparky innovators. As ever, the debate was too broad to defy any one attempt to summarise it. Most people will rate the experience based on what they personally learned and achieved.
This short article is my attempt to summarise what I learned about what I believe to be the fundamental questions facing sustainable investment … that we will need to make progress on before we reconvene next year.
It is also my plea that the debate should not be packed away into cases along with the conference stands. It has long been SRICONNECT’s objective to provide an online platform that enables the ideas that are raised over coffee and biscuits in the intensive forum of conferences to be nourished in a wider online environment before being returned – more developed – to the next conference … whether that be in London, Paris, San Francisco or wherever.
So, on my chosen subjects of interest, here is a quick recap of the questions that I brought to the conference (from bytes), the answers that I found there (over biscuits) and the issues that need more development (back to bytes).
Steadying the research value chain
From bytes: I asked: “How / When / What will catalyse stability in the SRI/CG research value chain?”
Over biscuits: At RI Europe, I learned that the pipeline of challenger research providers with differentiators is well-supplied; I found an interesting distinction could be drawn between ‘analyst-centric’ and ‘product-centric’ ratings providers; I saw the continued engagement of major players (with fat wallets) that suggest the current wave of M&A may have a little further to flow.
Back to bytes: I sense that some asset managers have disciplined research management and purchasing processes while others are very much ‘price takers’ in the whole process. So, I still question what it will take to shake the laggards out of a complacent “we just buy research from XYZ…” into a more pro-active approach to research selection that will benefit the whole value chain.
Re-asserting the primacy of investment outcomes
From bytes to bytes: My question about what catalysts will be needed to re-establish ‘investment outcome’ (rather than engagement for corporate change) as the primary output of the SRI process led initially to an online discussion on the subject. The need for this to happen is supported by Hugh’s piece on what’s in front for responsible investment.
Although I didn’t get to discuss this much at the conference, it is clear that a number of others (Hugh cites Danske Bank and Investec) are thinking about the issue and I am pleased to see that Rory Sullivan has tackled a similar theme in his recent challenge: Time for Honesty About Engagement.

Empowering ‘asset owners’
From bytes: Under this headline, I asked how the SRI/CG value chain could better support the typical smaller resource constrained ‘asset owner’ – and specifically support them in a way that enables them to take control of the value chain that supports them. I promised to listen…

Over biscuits: … and what I heard – paraphrased from a conversation with four such ‘asset owners’ was: “Less is more” – don’t overburden us with swathes of technical reporting. Keep it short, focused and meaningful. “More financial is more” – tells us about the most financially material ESG factors and their impact on the portfolio. “Think about our needs more closely” – the more you can help us illustrate what you are doing and why we have hired you to our members and beneficiaries, the better. “Don’t lie to us” – which I think is self-explanatory.Back to bytes: There’s still considerable work to be done here. I sense that, in spite of all of the policy statements, best practice guidance and reporting templates, our industry is still failing to connect in a broad-based way with the executives, trustees and beneficiaries of pension funds and other significant pooled assets. Or perhaps it is because of all of the policy statements, best practice guidance and reporting templates? Are we too guilty of the over-intermediation that Chris Sier in the discussion that I chaired was so determined to rid our industry of?
Communications
From bytes: My challenge on communications was that asset managers are terrible communicators and that sustainable investors aren’t much better. I asked: “What are the best examples of engaging communications by SRI investors?”
Over biscuits: Conveniently, the team at RI.com answered this question directly through their RI Reporting Awards 2018. I have long been a fan of these awards as I believe that self-motivated, self-directed responsible investment reporting and the prizes that it brings could drive sustainable investment practice as effectively as sustainability reporting drove corporate sustainability practice in the early nineties. If we extend the parallel, we conclude that we will reach a tipping point when the question changes from “Who produces reports? (List here) to “Who doesn’t produce reports?” … and progressive opinion will regard the excuses of non-reporters (“but our clients already know what we do”, “but we already report to the PRI”, “but we don’t need a glossy report to show what we are already doing”) in the same way as they regarded such feeble excuses from non-reporting listed companies.
Back to bytes: When will that tipping point occur? Will it be in this annual reporting cycle? Or in the next?
Engaging the ‘Expert Economy’
From bytes: There are more people working in the ‘Expert Economy’, a recent report from Civic tells us, than there are in the active US driver pool of Uber and Lyft combined. When, my challenge was, will the SRI/CG industry start to use the flexibility afforded by the pool of independent consultants, between-jobs analysts and autumn-of-career advisors that has grown up around our industry? The advantage of doing so is clear: the flexibility (and sometimes specialist nature) of this capacity enables all firms in the space (whether large or small) to extend their SRI/CG capabilities smoothly rather than in blocks of at least one headcount.
Over biscuits: … is exactly where you find such people. They (self-included) have mastered the conference lurk and the ability to pop-up at the beginning of a long queue for spicy Thai noodles with an idea for a project that you haven’t yet thought of. I avoided them. I have nothing to buy or sell to them. Instead, I was interested (and still am) in understanding from the larger firms the circumstances under which they are likely to use this sort of capacity … and – indeed – whether they are aware that this capacity exists and is available to them.
Back to bytes: The proof of this pudding is not, however, to be found near the conference biscuits. Over biscuits everyone is interested in an innovative proposal. The proof is to be found in the post-conference contract signed by an asset manager, asset owner, research provider etc that engages this sort of specialist capacity and in the experiences that they derive from this. That’s what I’ll be on the lookout for over the next twelve months.
From biscuits to bytes and back to biscuits
Signing off this article, I feel that I have now uploaded my experience of RI Europe to cyberspace and I would encourage all industry participants to do the same (either via RI’s Op-Ed pages or via an SRICONNECT blogpost (or ideally both) and via other channels. Then we can ensure that debate on these (and other) issues continues until it’s time to download it again for the next conference.
See you at RI America 😉

Mike Tyrrell is the Editor of SRICONNECT.