ESG: Investing that makes ethical and business sense

JERSEY manages a lot of money – much more than its fair share of global wealth – and efforts to ensure that it is put to good use are growing in momentum.

Dr Emiko Caerlewy-Smith (picture supplied by Dr Emiko Caerlewy-Smith) (30417637)
Dr Emiko Caerlewy-Smith (picture supplied by Dr Emiko Caerlewy-Smith) (30417637)

One of those at the forefront is Dr Emiko Caerlewy-Smith, whose consultancy firm, KIT, advise on environmental, social and governance investing, known as ESG for short.

With issues such as tackling climate change and diversity so high on the political agenda, Dr Caerlewy-Smith has committed to raising awareness that placing capital in the right places can make a huge difference.

She said that a good example of this could be making sure your pension was invested ethically, which she explained could have a much bigger impact than most people realised.

‘There was a fascinating statistic produced by Nordea bank recently that says that the personal carbon footprint of our pension is 27 times more than the personal carbon footprint of how much meat we eat, how many flights we take, how energy-efficient our house is and a host of other personal carbon choices that we make,’ she said.

‘The global pensions industry is worth $30 trillion out of $100 trillion global assets under management.

‘If you can take that $30 trillion and channel it towards the delivery of the sustainable development goals in a way that still makes investors a return on their money so that it can pay their pension benefits, then that goes a long way.

‘Richard Curtis, of Four Weddings and Funeral fame, set up a campaign recently called Make my Money Matter, which has been designed to motivate us, as individuals, to question where our pension is invested and put that pressure and investor influence on our pension scheme trustees to make better investment decisions that are aligned with positive ESG impacts.’

A signature project for KIT this year will be its #BuildBackBetter educational campaign, launched with The Potting Shed design agency and Rathbones Investment Management. Coinciding with the launch of Jersey Finance’s sustainable finance strategy, it will aim to upskill selected individuals as the Island’s ‘next gen’ leaders in sustainable finance.

‘We’ll be looking for 30 participants from banks, asset managers, funds, trust companies, lawyers. The whole raft of industry coverage,’ she said.

‘And we’ll also be inviting participants, if they’re interested, from any financial-services quangos or government-related organisations and other professional-services consultancies.

‘It’s a year-long programme where we have bi-monthly virtual meet-ups and each of the meet-ups is about a different sustainable finance topic, and we’re getting experts from off and on-Island to lead those sessions.’

She added: ‘It is very educational and it’ll cover things such as the technicalities of integrating ESG factors into investment decisions or how to create a shared-value organisation. It’s practical-sustainability consulting tools that we’re giving away for free to this cohort of 30 next-gen leaders, so that they can go and embed that organically in their organisations. This new skillset, I think, is really vital for Jersey’s financial services industry to have for the future.’

On top of its work locally, KIT is also active in the international sphere and will be involved with promoting sustainable finance at this year’s G20 summit.

Dr Caerlewy-Smith said that this demonstrated the impact that Jersey’s business sector, and its rich skill base, could have on global affairs.

‘There are some huge global initiatives this year. We’ve got COP 26 in the UK and the G20 summit this year, which fascinatingly KIT is supporting on,’ she said.

‘We’’re working with the UN Development Programme, which acts as the secretariat to G20 in Rome in October. We’re helping with the agenda-setting and the research papers that are going into the sustainable finance agenda.

‘So, we have this little management consultancy here in Jersey and yet we are able to contribute to these global issues. I think it’s really important that our clients and our community that we work in, our financial-services community locally, can all start doing that. If we can all start playing our part in this bigger global picture for ESG and sustainability, we have a real opportunity because we’ve got highly skilled people here, we understand how to manage wealth.’

She added: ‘We could even grow this attraction for Jersey as an employer of choice in sustainable finance, to help bring more sustainable finance skills here. Hopefully, it’s a self-perpetuating and reinforcing community that we’re building in sustainable finance. I think investor sentiment for ESG-related positive impact has definitely grown over the last year, with Covid, and was already building anyway. Really we are just pushing on an open door.’

Younger generations, such as the millennials, have become well known for their passion for environmental and ethical issues, and finance leaders expect this to drive change in investing patterns as wealth and power increasingly passes into their hands.

Dr Caerlewy-Smith said, however, that it was not just the ‘new generation’ who were thinking differently, and, on top of the ethical issues, ESG investing made good business sense.

‘I think we are starting to see two things. One, the ESG factors are just common sense because environmental, social and governance factors are going to affect the success and therefore value of a company over time,’ she said.

‘If you’re not managing your environmental risks properly, or your social risks as a listed company, then your share price at some point is going to feel the impact of that because it’s a financially material risk to your business.

‘Investors are more and more interested because they’re seeing the risk side of the issue. They’re seeing ESG factors as a risk of share prices and the performance of companies.’

She added: ‘The other side of the coin is that Covid-19 has just driven this more ethical and moral interest in ESG issues, where people just realise that is the right thing to do to start better looking after our planet and the people in it.

‘Hopefully, we’re now motivated to want to change our behaviour. And it isn’t just good sense because it manages our ESG risk or because it’s the right thing to do, it’s good sense because we’ve now actually witnessed what happens when you don’t steward and look after our environment properly.’

Top Stories

More From The Jersey Evening Post

UK & International News