The need for fund managers to go above and beyond when it comes to sustainable investing strategies is essential as the sector’s popularity continues to increase. We speak to Columbia Threadneedle Investments fund manager Sonal Sagar about how they are actively pursuing a new approach to meet ESG goals.
Governments around the world, including the UK, are focusing their Covid-19 recovery plans on sustainable megatrends around energy transition, green infrastructure, healthcare, and financial inclusion, and for Threadneedle UK Sustainable Equity Fund having exposure to such themes has become a necessity in 2021.
In fact, there are several sustainable global leaders in the FTSE All-Share Index, which the group feels are trading at too-wide-a discount compared to other international indices. This is despite over 75% of the FTSE All-Share's earnings coming from outside the UK.
While Sagar believes there will be a greater shift away from ESG funds using negative exclusion strategies in their process, which should drive standards up in the coming years, the fund manager is looking to implement more rigorous processes into her investment strategy today too.
For example, fund analyst Michael Hamblett explains that the fund already looks at several key non-financial factors that determine whether a company is successful or not. The group may investigate the size of business carbon emissions and what it is doing to reduce these, or explore the quality of the board or management, identifying how much they're paid as necessary.
But perhaps most importantly, Hamblett notes the group is specifically looking for the IMPACT of what the company makes.
"So if we are investing in a healthcare company, how many people in poorer countries are getting access to treatment? The aim is to try and quantify the positive impact that their activities have," he explains.
What is absolutely crucial to all of this is engagement, he adds.
"As an active manager, we have the discretion to pick and choose what we buy and sell and a lot of that depends on the conversations we are having with a business. As a large active manager, we get good access to and have these conversations with a range of C-suite and board level individuals as well as sustainability experts within the businesses."
Click here to read more about how fund managers are learning to stand out in a crowded ESG sector, in our latest Three Minutes With… interview.
