Keynote: Dr Aniket Shah
Inspired by ‘A Tale of Two Cities’ by Charles Dickens, Dr. Shah outlines parallels in the ‘best of times’ and ‘worst of times’, depicted in London and Paris around the French Revolution. Listing the good and bad news in sustainability, Dr. Shah notes the heightened uncertainty today, and how implications for investors need to be examined by materiality-driven scenarios.
Our academic guests highlight data difficulties with ESG disclosures and in accounting for intangibles. Recently published research validates ESG outperformance by identifying material factors for company analysis, rather than general ESG factors. A step change from previous ESG research with ‘no difference’ conclusions.
Research Presentation: Gillian Mollod
Using her expertise in geospatial analytics, Gillian Mollod shows how risks from climate change have been identified globally for locations with water stress, hurricanes and storm surge, and flooding. Material implications are for companies operating assets in affected areas, depending on their ability to avoid, transfer, or control risks.
Real Assets Materiality
Real estate sees outperformance from good ESG. Higher rents, lower turnovers, fewer crimes and vandalism. The power and gas industry see value creation through divestiture from coal: switching to cleaner-burning LNG. Low-cost renewables are on the competitive threshold; particularly solar.
Private Equity Materiality
Noting the problem with companies ‘window dressing’ ESG issues or relying on side letters, the panel are in agreement that ESG issues are business issues. Recommended analysis includes ‘going senior’ and asking questions during due diligence. If ESG strategy is misaligned with company strategy, that’s a red flag on senior communications.
Keynote: Georg Kell (Founder: UN PRI)
Taking a step back, Georg reflects on his engineering mindset to conclude decarbonization will be forced to survive within planetary boundaries. Georg looks at how this might play out as a transition from the ‘industrial’ to a ‘future’ model of society.
Equities Financial Materiality
Identification of material ESG issues is one way to apply mosaic theory and identify where problems or opportunities haven’t been priced into the market. Once identified, material factors should be mapped into accounting line items. A case study of Anheuser-Busch InBev is discussed.
DWS Presentation: Systemic Active Equity Strategy: Pankaj Bhatnagar, Ph. D
Pankaj Bhatnagar, Ph. D. runs through the DWS ESG Core Equity Fund. They take in ESG data to narrow the investing universe, and create a portfolio that doesn’t compromise on returns. The natural drawback is an increase in tracking error.
Fixed Income Materiality
As they roll out their ratings and reviews, Moody’s will incorporate an ESG ‘heat map’ for issues, and discussion in their analyst’s report. Unlike equity investment, there is no single ‘fixed income’ product per company: the bond’s time horizon plays an important role. The panel discuss how they see fixed income risks and opportunities via ESG analysis, and answer on the benefit of ESG, given material factors have been incorporated.
Christine Pishko reviews the flagship projects and principles of the PRI. Asset owners have showed increasing interest: city and state treasuries, pensions, and insurance companies. A common theme is that incorporating ESG factors is the best way signatories serve investor interests.