The RI team share this expertise across RLAM’s investment teams, working closely with them to help ensure ESG issues are included in all decision-making processes. Piers Hillier, Chief Investment Officer, explains how ESG is integral to the investment process at RLAM.
Why is responsible investment important?
For me, responsible investment is the heart of how we deliver better outcomes for our customers.
It's not a one off hype factor at this particular point in time. It's something fundamental to how we ensure we not only deliver great financial outcomes to our customers, but also benefits to society as a whole.
What drives our long term commitment to responsible investment?
To deliver good long-term outcomes and meet our customer’s expectations, we need to invest in a way that's sustainable into the future. We think that environmental, social, and governance factors in addition to the traditional financial metrics that we would use really do help us deliver those better outcomes to customers. So the E, S, and the G - the environmental, social and governance factors - are key to our thinking in terms of how we analyse companies and how we analyse the investments that we make to deliver those long-term outcomes.
To give you a real practical example of that, let's look at the energy sector. So traditionally a very carbon intensive sector, and it's an industry that wants to transition to carbon neutral to even carbon negative into the future. And so we'll work with those companies to look at how they deploy capital responsibly into the future to be able to deliver those goals, and hopefully deliver better financial outcomes for our customers to meet their long term needs.
What is ‘stewardship’, and how do we undertake our stewardship responsibilities?
Stewardship in the first instance is us being guardians of our customer’s capital. They've invested with us to deliver long-term financial outcomes, and it's (a question of) how do we deploy that capital in a responsible way to deliver, meet, and hopefully exceed their expectations?
To give you a couple of examples of this – the first one I'd like to use is Metro Bank. It's a bank that we've engaged with for a considerable period of time, and we were worried that what was a very visionary Chairman when the business was first created was now starting to be more of a “group-think” type organisation.
What we needed was greater diversity on the board, and we wrote to the board, consulted with the senior independent director in terms of how we might actually affect board change, and that's taken place. We hope now that with a more diversified board and more diversified thinking that Metro Bank will see a long-term successful future.
A second example of that is around voting. We vote over 15,000 resolutions on your behalf each year - just breaking that down, one example is with respect to executive pay. We engaged with over 80 companies last year about executive pay schemes to make sure they're aligned with the long-term interests of us and you as investors, and making sure that we don't over-reward management for factors that are necessarily beyond their control, and make sure that actually there's long-term alignment there for us, for you in terms of your financial outcomes, but also delivering better outcomes for society as a whole.
How do we ensure companies are addressing climate change?
Climate change is a really significant issue in terms of long-term investment, and it's one that we really take incredibly seriously here at Royal London.
To give you a good example, we engage with Climate Action 100+, which is a group that comes together to try and tackle the biggest greenhouse gas emitters in society. To give you a practical example of what that really means; we've done a recent analysis for our engagement with the gas utility sector in the UK, and what we're looking at is companies that really understand how we can target lower carbon emissions, and move to a carbon neutral/carbon negative future.
And what was interesting is that we found companies that really don't think that this is that significant, or they're not really committed to deploying capital into the future, and the one joy in some ways of fixed income is that we can actually allocate capital to new projects. So we're committed to allocating our capital to projects that are committing to a lower carbon footprint going forward.
Are there any areas that you won’t invest in?
Our passion here at Royal London is actually not to exclude.
We understand there are arguments for it, but ultimately we think the best thing to do is actually try and engage for change, and actually work with companies, and the investments that we make that actually improve the outcome for society, because we allow companies to transition effectively.
Ultimately we retain that sanction to sell. I think that's really, really important that we can vote with our capital - your capital - and take money away from businesses that don't think about the impact of responsible investment and what that means for society as a whole.
We're constantly allocating new capital to businesses, and we have the ability to have a more immediate impact in terms of where that capital is going. So when companies are looking to raise money to finance a new investment, they often come to the fixed income market to say, “Can I borrow some funds to actually build out this new project? And this is what I'm going to do with the capital.” And if we don't think they're acting in a way that's to our best benefit, we can engage and say, “We think this would be a better outcome.”
If ultimately they say “No, this is what we want to carry on doing,” then we can choose not to deploy capital to them. So is a really good sanction in the way we deploy our fixed income capital, and that's how we ensure we deliver better outcomes for you.
What are our plans for responsible investment in 2020 and beyond?
Responsible investment is something I've been really passionate about since I arrived at Royal London five years ago, how we incorporate it as part of our focus investment philosophy.
In 2019 we created a dedicated team of three. Over the last 18 months we've been investing into that team, the team is now nine and we've recruited in specialist data scientists to help us in terms of quantitative tools. We've brought in property expertise as well. So we're really committed to responsive investment in terms of how we can embed that as part of our investment proposition and hopefully deliver much better customer outcomes for the future.
Piers joined RLAM in January 2015 as Chief Investment Officer, with responsibility for managing and developing RLAM’s investment capabilities. Piers has over 25 years of investment experience, including roles as Head of International Equities and a member of the Strategic Policy Group responsible for setting Asset Allocation for multi asset portfolios at Kames Capital. Prior to this, Piers was CIO and Head of Asset Allocation for LV= Asset Management and previously CIO European Equities for WestLB Asset Management. He also previously held the position of Head of European Equities at Deutsche Bank and Schroders. In his current role, Piers is a director of Royal London Asset Management Ltd, Royal London Unit Trust Management, a member of the RLAM Executive Committee, and chairs the RLAM Investment Committee. Piers holds a Bachelor’s degree from the University of Bristol and Masters degree from the University of Oxford.
Ashley joined RLAM in November 2013 following the acquisition of The Co-operative Asset Management (TCAM) by the Royal London Group. Ashley is responsible for RLAM’s responsible investment strategy across all of our asset classes. She oversees a team of seven people, and has management responsibility for our company engagement, ESG analysis, and proxy voting. Before joining RLAM, Ashley worked with the UK’s local authority pension funds on company engagement as a Shareholder Engagement Executive at PIRC and the Local Authority Pension Fund Forum (LAPFF). Ashley is Canadian, and started her career working with Canadian pension funds, foundations and mutual funds as a research analyst and corporate engagement consultant for SHARE, a non-profit based in Vancouver, Canada. She has a Master of Arts degree (Political Science) and a Bachelor of Arts degree (Political Science and Sociology) from the University of British Columbia. Ashley is RLAM’s subject matter expert and spokesperson on responsible investing and corporate governance, and provides regular press commentary. She sits on the Sustainability and Responsible Investment committee of the Investment Association.
Sophie joined the RLAM Sustainable Investment team as an analyst on a fixed term contract in March 2016. After a brief period working for another wealth manager, she returned to RLAM in November 2017. She is responsible for managing the proxy voting process, corporate governance analysis and focuses on company engagement on governance and social issues. Sophie joined from Institutional Shareholder Services (ISS) where she worked in both the Client Account Management and Custom Research teams. She holds a GDL and LPC from the University of Law Bristol; a LLM in International Corporate and Commercial Law from the University of York and a BA (Hons) degree in History and Archaeology. Prior to this Sophie lived in Grenoble, France for seven years and attended the international school, CSI Europole.
Tom joined the team as a Responsible Investment Analyst in May 2018. He carries out a lot of the day-to-day company research, particularly in the investment grade and high yield fixed income space, both for RLAM’s sustainable funds and more broadly. He also works closely with a number of equity teams and provides corporate governance support when required, particularly during proxy season. Before this Tom spent nearly three years working in Royal London’s Group press office, focusing in particular on the asset management business. Tom spent a number of years growing up in Singapore, Malta and Hong Kong and has a degree in Politics and Philosophy from Cardiff University.
Beth joined the team as a Responsible Investment Analyst in June 2019, to work on the expansion of RLAM’s responsible investment strategy and to provide support on company screening and ESG engagement. Prior to this, Beth spent five years working at KPMG, working with FTSE 250 companies on ESG disclosure and risk management. Beth holds a BA in Environmental Management from the University of Leeds.
Carlota joined from the Church of England National Investing Bodies, where she spent three years running high profile corporate engagements focused on climate change, international corporate tax, and Board diversity (among others). Before joining the Church of England, she was the Director of Products and Services at a tech start-up (Datamaran, formerly eRevalue) where she led the research team to develop software for sustainability benchmarking. Prior to that, she spent 10 years and was Head of Research at EIRIS (now Moody’s following its merger with Vigeo) where she led global ESG research and product development. Carlota has a deep interest in analytics and the integration of externalities (environmental and social) in corporate assessment. She uses techniques learned during her business development and sales role at eRevalue in her company engagements. Carlota has studied Corporate Governance at ICSA, she is a Civil Engineer with an MSc in Environmental Economics.
Jeff joined the Responsible Investment team in October 2019 as an analyst working on proxy voting, company engagement and corporate governance analysis. Previously, Jeff spent nearly three years at Institutional Shareholder Services (ISS) where he worked as a custom research analyst in providing bespoke proxy voting solutions and corporate governance consultations to several institutional investors. While Jeff currently resides in the UK, he often travels to his birthplace country of Kenya to connect and spend time with his extended family. He holds a Masters in Economics from the University of Exeter and a BSc (Hons) Economics degree from Swansea University.
Simonetta joined the team as a Responsible Investment Analyst in March 2020 to work on the expansion of RLAM’s engagement strategy. Prior to this, she worked at the Green Finance Institute in London and she spent 4 years working at the Foreign and Commonwealth Office working as Climate Change and Energy Officer. Simonetta studied International Relations and Public Administration and holds an MSc in Environmental Change and Management from the University of Oxford.
Piotr joined the team as a Corporate Governance Analyst in October 2019, to work on the expansion of RLAM’s proxy voting and governance activities. Piotr has joined from Institutional Shareholder Services, where he worked as a custom research analyst, providing institutional investors with bespoke vote recommendations. Piotr has a Masters degree in Business Law and LLM in Corporate and Commercial Law from Maastricht University. Prior to moving to the UK, Piotr spent almost seven years gaining his educational and work experience across continental Europe while living in Poland, France, Netherlands, Portugal and Belgium.
Abi joined the RI team in November 2019 as an Assistant Responsible Investment Analyst. She moved over from the RLAM Marketing team where she had spent the last three years as a Marketing Executive, servicing both institutional and wholesale channels. Prior to joining RLAM, Abi held sales support and project roles at Schroders and EY respectively. Abi provides general support to the RI team in terms of research and data analysis, and assists in providing more agile and effective responses to client queries, due diligence questionnaires, and RFPs. She is also responsible for helping the team to convey its ‘story’ to key stakeholders through the effective use of communication channels. Abi has a BA (Hons) degree in Business Management from the University of Greenwich.