This morning we hosted a group of eight charitable foundations including some of the UK’s largest, to discuss what ‘climate conscious’ investing might look like for these groups.
The seminar followed in the wake of two seminars we hosted for corporate pension funds earlier this year. At each event, we’ve posed the question, ‘if sustainability is part of the strategic thinking of your organisation, shouldn’t it also feature in the way either the pension fund or the endowment is invested?’
The organisations which attended the meetings –including 11 FTSE 100 companies and several of the largest charitable foundations in the UK – were obviously self-selected and therefore, perhaps unsurprisingly, there was no real push-back on the basic logic of this argument. Indeed, there was clearly much more appetite to focus on ‘how’ to implement sustainability in their investment decision-making rather than ‘why’.
What else surprised us from the meetings? There was definitely a ‘glass half full’ element to the fact that a small group of corporate pension funds and charitable foundations have already advanced a long way in developing and implementing sophisticated sustainability investing policies. The ‘glass half empty’ part of this equation was that it is still only a relatively small group, and perhaps most surprising, that there are probably more corporate pension funds in this leadership cadre than charitable foundations.
Why this should be is not entirely clear, but as one foundation participant put it, foundation investment committee members tend to be ‘older and very senior’ and one might add ‘schooled in the city’ at a time when ESG thinking was total anathema to any right-thinking investment manager. Corporate pension funds, in contrast, are often at least partially staffed with employees who have learnt to be much more sympathetic to the sustainability agenda through their corporate experience and training.
It was also clear that climate change – both the issue itself and the divestment campaign that is building around it – has become the most acute ESG issue to attract their attention. In most cases trustees feel ill-equipped to grapple with the implications effectively, but it is certainly a reputational, if not an investment, risk on their radar.
In all three seminars, perhaps the strongest message, however, was the very real appetite to develop practical tools that investment committees can get stuck into. The next seminars will hear from pension funds and foundations that have already embarked on their sustainability journey and will focus on applying their lessons to those just about to start. Watch this space!