Responsible investing in a changing world

Jenna Lindbeck: The investment landscape is quickly evolving. We have new standards, new regulations, and investor expectations are only escalating.

It's an exciting time to be in and speak about responsible investment.
To talk about this a little more, I'm joined by Fiona Reynolds, a very well-respected leader in responsible investment and also a member of our Roc Partners Advisory Board. Welcome Fiona.

Fiona Reynolds: Thanks Jenna. It's great to be here.

Jenna Lindbeck: In today's climate, what does it mean to be a responsible investor and what qualities distinguish managers who are genuinely integrating ESG from those who are simply responding to pressure?

Fiona Reynolds: Well, I think in today's environment there's a lot of pressure because we're in a very fast-changing world and obviously managers are under pressure from their clients, they're under pressure from, they can be under pressure from the media, from trying to understand the world around them.

And I think that it being a good responsible investor in today's world really means understanding about those pressures, but also about what is going to drive long-term value for their clients, because that's what's important.

And you can't really think about long term value creation if you don't think about risk and you don't think about opportunities.

And those risks and opportunities have to include in today's world, environmental risks such as climate change, social risks and governance risks.

And I think what sets aside managers who are doing this genuinely rather than those who just sort of talk about it, is intentionality.
So they're intentionally thinking about these issues and they're building them into their internal processes. Most importantly, they're building it into their investment process.

They're able to, you know, walk the talk and they're able to demonstrate that they're doing it.

I think that's what sets a good manager apart.

Jenna Lindbeck: It's interesting you say that, Fiona, because increasingly over the past 12 months in particular, our investors are asking us to evidence and substantiate our approach.
And I think that really talks to some of the points you just pulled out around intentionality.

Fiona Reynolds: I think exactly. It's not enough to just say I am doing this or I believe this.

You need to show that you're doing it and you need to show you're doing it within that whole investment process.

Jenna Lindbeck: With ESG standards evolving at different speeds globally, how can investors navigate these difference ensure they are credibly operating across jurisdictions?

Fiona Reynolds: Well, first of all, I'd say it's really challenging because the ideal situation that we want to get to is that there's harmonisation of standards across jurisdictions, but we're not there. Really we've got a patchwork of regulations and standards across the world and I think it's going to remain that way for some time.

So it's difficult for investors to be able to navigate.

So again, I think it's really important that investors understand what they're trying to do and internally what their processes are and that they keep on developing their own internal ways of working. When it comes to regulation and when it comes to all of the different standards that are in the place. We also know that governments come and go and regulations change.

But as investors, we're here for the long term.

So we need to be able to embed these processes regardless of what's happening from regulation. Obviously, as an investor, we need to, as a minimum meet the standards that are in place in the different jurisdictions in the world, around the world. But we need to go further than that.

And it is about your own internal values, your own internal processes, and how you work with your own clients on these issues because everything's just changing at such a quick pace.

Jenna Lindbeck: With that in mind, Fiona, do you have any examples you could speak to, kind of bring that point to life?

Fiona Reynolds: I think one of the important things to remember when it comes to different regions and different regulations is that different countries are at different points of their journey around responsible investment and integrating sustainability across their economies and across their financial sectors.

So we're just not at one place. And unfortunately, as investors, we have to work within a very patched worked framework and do what we can, as I said, meet the minimum standards that we are required to do in every country because of their regulatory environment.

But make sure that internally we really understand what's going to drive long-term value for our clients and embed that within our own processes.

Jenna Lindbeck: Australia recently released its national climate risk assessment results and established renewed targets for emissions reduction by 2035. What are the implications of these developments for investors?

Fiona Reynolds: Well, first of all, I think the risk assessment report that came out was really important reading.

Whether you're a citizen or whether you're an investor. It's very clear about the implications of not dealing with climate change, that in our future, if we don't step up and deal with these issues, we will live in a world that has a lot more climate impacts.

Whether that is increased extreme weather impacts, that matters to us as investors not going to put capital, long-term capital away in areas that are going to be affected by climate change.

So I think what the 2035 targets do is they provide investors with a bit more certainty about government direction.

That's important for investors. Investors do not like uncertainty.

Now, of course, with any transition, transitions are not simple. We haven't decarbonized the global economy before, and we're still sort of working and learning as we're going.

That's why I think the sector pathways that came out with the government's report were also very important for investors. It sets a direction.

Jenna Lindbeck: So is there more that needs to be done?

Fiona Reynolds: There's definitely more that needs to be done. The transition isn't easy, as I already said, but we also know that we need to do more in terms of regulation.

We know that in terms of our approval processes for projects, that that needs a lot more clarity.

So there's plenty that governments need to do, but we need to be able to do it in a way that is staged, that everybody understands.
But I think we're clear now about where we're heading in the next 10 years, and that makes it better for investors.

Government still need, as I said, to find more clarity around the regulations, the standards that are going to help us put all of these things in place.

But at least we know the direction of travel.

Jenna Lindbeck: Thanks so much for being here today, Fiona.

Your insights are always invaluable, and we thank you for the guidance that you provide us with at Roc Partners.

Fiona Reynolds: Thanks, Jenna. Great to talk to you.