Responsible investing and ESG: what gets measured gets managed

10th July 2022

At a glance:

  • Companies should use accepted reporting frameworks and produce dedicated annual sustainability reports so that it’s easy to assess their environmental impact.
  • We use these reports alongside our fund managers’ engagement work to ensure we invest your money responsibly and maintain pressure on companies to set and meet ESG targets.
  • Our reporting on our portfolios enables you to understand the difference your investments can make.

Most investors want to help the environment. But some companies have exaggerated what they do in this area, known as greenwashing. In response, investors are demanding more and better information.

To avoid accusations of greenwashing, companies must be fully transparent about their environmental footprint and their actions to mitigate it.Financial advisers and fund managers play a key role by scrutinising each company’s activities and reports; setting environmental targets, such as net zero carbon emissions; and holding companies to those targets.

At St. James’s Place, we aim to lead in this area, because it’s right and because we know our clients expect it.To make sure companies ‘walk the talk’, we look for transparent measurement and communication of environmental, social and governance (ESG) practices and outcomes. This includes using accepted reporting frameworks and publishing the information in dedicated annual sustainability reports.

ESG disclosures from companies have improved in recent years through frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), which improves and increases reporting on climate-related issues; and the Global Reporting Initiative (GRI), which also covers social issues such as workers’ rights and corruption.

Many companies produce annual sustainability reports that detail all this information. This makes it easier for investors to access it quickly and monitor yearly progress.

Why measure ESG?

But we need more. The impacts of climate change have become critical. A 1°C global temperature rise is causing climate breakdown and damage to humans, animals and ecosystems. Three of the five most likely risks identified by global business leaders are environmental1. Without urgent action, these effects will worsen.

But promoting a sustainable economy brings many investment opportunities, too.

Investors need clear, high-quality information to assess the risks and opportunities related to climate change and other ESG issues. Initiatives such as TCFD and GRI provide a framework for firms to report these.

We aim to use all this information, together with our fund managers’ engagements with companies, to make sure the money we invest responsibly on your behalf has a positive effect.

We have also worked with market researcher The Wisdom Council to understand how you feel about responsible investing. The research highlighted that our clients’ deep environmental concerns remain a priority, and you expect leading brands such as ours to incorporate sustainable practices into our business2.

Walking our talk

Engagement is a powerful way to maximise our influence and make a real difference. Last year we appointed Robeco as our engagement partner to enter into dialogue with investee companies on ESG issues and sustainability risks and opportunities. This enables us to advocate for real change on behalf of our clients.

We are taking several urgent actions on climate change. We have been member of the UN-supported Principles for Responsible Investment, a network of investors that promotes responsible investing practices, since 2018. We are also members of the Net-Zero Asset Owner Alliance, a highly select group of asset owners who have committed to their investments being net zero by 2050, if not sooner.

We have also started disclosing our climate-related risks through our TCFD report, and disclose the carbon emissions of all our Growth, Income and InRetirement Portfolios, in a dedicated portfolio carbon emissions report. This is a key step towards helping you understand the impact your money can have.

You can make a difference

Petra Lee, our Responsible Investment Consultant, says: “What gets measured gets managed. By reporting the carbon footprint of our portfolios, we can identify risks and highlight opportunities for change.

“We will continue to align our portfolios against science-based targets to mitigate the harmful effects of climate change. This helps us use money as a force for good, and it makes investment sense.”

Many advisory clients are still not clear whether they can invest their money to tackle environmental challenges. But these actions help show you can make a difference through your investments. TCFD and our other reports and disclosures are a catalyst and will maintain pressure on all the fund managers we work with, who in turn will pressure the companies they invest in, creating a snowball effect.

St. James’s Place’s responsible investing page and TCFD report help clients explore these subjects further and show how you can benefit from the opportunities in a sustainable, low-carbon economy.

Our world is changing faster than anyone predicted. We believe responsible investing has a huge role to play in shaping a better world and building a sustainable future.

Past performance is not indicative of future performance.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Sources

1 The Global Risks Report 2022, 17th edition, World Economic Forum, 2022

2 Responsible Investment 2020, St. James’s Place and The Wisdom Council, January 2021, total sample size: 2,067 adults