The asset management industry may have evolved its environmental, social and governance approach, but both disclosure levels and methodologies must improve to “create an appropriate picture for the future”, according to Ninety One Asset Management’s global head of sustainability Therese Niklasson.
In December last year, Ninety One committed to the ‘Say on Climate’ initiative, which Niklasson describes as an important opportunity to create better accountability and dialogue between companies and their investors.
The approach simply encourages listed companies to submit a Climate Transaction Action Plan to a shareholder vote at AGMs.
Notably however, Ninety One has not yet signed the Net Zero Asset Managers commitment, an initiative managed by six founding partner investor networks, including the Institutional Investors Group on Climate Change.
“While we fully endorse the importance around net zero and the Paris Agreement, we were concerned that some of the commitments did not come with real plans for how to get there,” she admits.
Progress over promises
Instead Niklasson and her team seeks “progress rather than promises” on ESG methodologies and claims investors should support companies and understand the different pathways to a decarbonised growth model that are required.
Turning to its decision to support the ‘Say on Climate’ initiative, she adds: “By allowing companies to present on a non-binding basis details of their transition plan, endorsing science-based targets and reporting through a TCFD framework, we believe this can bring much needed action or a purposeful dialogue when this is lacking.”
“Ultimately we, as asset managers, become net zero as our investments become net zero and that is the focus we must have,” she adds.
“We must be cautious of leaving the transition of emerging markets behind by looking to achieve net zero in our portfolios which, in the short and medium term, can mainly be achieved through divesting from carbon intense assets.”
Niklasson says she is focused on “sustainability with substance” when it comes to integrating ESG within the firm’s investment teams and strategies, and tries to avoid the “ESG by-the-numbers” approach.
The sustainability team she heads up started as a focused ESG team, “with the long-term vision of increasingly embedding elements of the ESG work and analysis within the investment teams”.
She says a “critical milestone” at the asset manager was the transition to a sustainability team, which has “overarching responsibility for supervising and supporting the wider sustainability ecosystem in the business”.
“This evolution underpins Ninety One’s collective efforts to ensure our 200 investment professionals have developed and continue to develop the skills that generate a holistic approach to integrating ESG analysis,” she says.
“As a sustainability team, we prioritise our time on providing our investment teams and risk teams with specialist support where it is most required, the ongoing development of our sustainability and stewardship policies, meaningful advocacy initiatives and internal sustainability governance.”
Creating a framework
This ESG integration into investment decisions is just one part of the firm’s sustainability framework of “invest, advocate, inhabit”.
On a corporate level, the sustainability strategy is focused on five areas – energy, waste, water, sustainable travel and responsible procurement – with the overall aim of reducing its carbon footprint.
There is also ‘Ninety One Green’ – a grassroots initiative of champions within the business driving efforts to become more sustainable.
“Alongside our commitment to continue to create strong integration practices, we are building our suite of dedicated sustainable investment strategies which target the specific improvement of certain measurable sustainability issues,” Niklasson explains.
She cites as an example its Global Environment Strategy, which seeks to offset climate risk in investors’ global equity portfolios by investing in renewable energy, electrification and resource efficiency companies.