Wells Fargo Asset Management CEO Nico Marais has said he will “personally sponsor” the firm’s ESG initiatives, as he announced a new sustainable investing taskforce in a memo to staff last week.
Marais says newly-appointed Co-heads of Sustainable Investing, Chris McKnett and Hannah Skeates, will report to him and drive efforts on ESG integration and developing new products. He also says it will partner with its parent Wells Fargo on the future development of sustainable finance.
Wells Fargo, the fourth-largest bank in the US, has come under scrutiny for its approach to sustainability as it remains the second largest financier of fossil fuels.
"There is not a single soul that would disagree with doing good."
Marais, who became sole WFAM CEO last year having joined from Schroders in 2017, tells RI there will be exceptions: “This is a new road for all of us.
“My experience through the years has been, if you take people with you the odds of success are so much higher. Sometimes aspects might not be consistent with your overall philosophy. But I don't think anyone should be put off by exceptions or anomalies. I also think that we’re making tremendous progress,” he says, noting a recent report on Wells Fargo’s climate change commitments and its high-rating for serving low-income communities.
Marais brings the philosophy of “taking people with you” to his approach to driving sustainability at WFAM. He added a new ‘outcome’ of “doing good” to the firm’s mission statement, a term he says avoids the negative or political connotations of ESG.
He explains: “As a firm we have defined four “outcomes” we recognise as part of our culture. The first is to protect wealth, the second to grow wealth and the third to pay income from wealth.
“We added a fourth last year and that is “doing good”. I like that phrase better than ESG which can have positive or negative connotations depending on who you are. But there is not a single soul that would disagree with doing good.”
Marais says in a year’s time he would like to see more sustainable investment options at WFAM. He also says he wants to drive education about ESG. “I believe there is tremendous confusion around how to proceed, especially in the US. If we could support leaders solving problems and help investors make sense of the industry that would be a success.”
He would like to focus on measuring “doing good”. “We talk about financial ‘alpha’. We want to beat the benchmark. But what is ‘social alpha”? How do we help investors actually understand what that means?” he says.
But the most important thing, says Marais, is company buy-in, especially that of portfolio managers, so it is “walking the walk”.
“So when we have a climate action initiative, what does that mean for a portfolio manager? How do we educate them? How do we take research at the policy level and integrate that into an investment process? That is where the credibility and authenticity will come, translating it into real actions.”
Marais speaks to translating climate change investing into the language of risk and return for portfolio managers; but he also couples that with resonating personally with colleagues.
“I’ve made it very clear that I would love my grandchildren to be able to walk on the beach.”
Like every investor, the Covid-19 crisis is currently top of mind at WFAM. Marais says he is interested in how it intersects with the climate crisis and ESG investing.
“I just read an article yesterday on the Amalfi Coast and how dolphins are returning. When you look around and see how clear the air is and how nature returns. It’s a powerful example of how, in the middle of this pandemic, the world could look like. I think this will resonate going forward and be a stimulus in terms of ESG investing.”
Human capital management practices are coming into focus again, he says, as is the social fabric. “That debate is going to continue. Many ESG strategies have done really well in this period. As an optimist, I think the movement towards sustainability in all dimensions, from how we experience nature around us to sharp focus on social justice, will grow. And we really want to be there in terms of products and solutions.”