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You need to enable JavaScript to run this app. This website uses cookies, including third party ones, to allow for analysis of how people use our website in order to improve your experience and our services. By continuing to use our website, you agree to the use of such cookies. Click here for more information on our Cookie Policy and Privacy Policy. closeContinue This site is part of the Informa Connect Division of Informa PLC * Informa PLC * About Us * Investor relations * Talent This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067. * About Us BROWSE OUR EVENTS, TRAINING, ARTICLES AND PEOPLE BY TOPICCLOSE Popular topic FINANCEARROW_FORWARD Featured brands Popular topic BIOTECH & PHARMAARROW_FORWARD Featured brands AGRICULTUREARROW_FORWARD Featured brands AUTOMOTIVELAUNCH EDUCATIONARROW_FORWARD Featured brands ENERGYARROW_FORWARD Featured brands FOOD SERVICE & HOSPITALITYARROW_FORWARD Featured brands HEALTHCARE & PAYER MARKETSARROW_FORWARD Featured brands HRARROW_FORWARD Featured brands LAW & REGULATIONARROW_FORWARD Featured brands MARITIMEARROW_FORWARD Featured brands MARKET RESEARCHARROW_FORWARD Featured brands MARKETING, SALES & COMMUNICATIONSARROW_FORWARD Featured brands MEDIA & ENTERTAINMENTARROW_FORWARD MEDICAL DEVICES & DIAGNOSTICSARROW_FORWARD Featured brands SECURITY & DEFENCEARROW_FORWARD STRATEGY & INNOVATIONARROW_FORWARD Featured brands SUSTAINABILITYARROW_FORWARD Featured brands TECHNOLOGYARROW_FORWARD TELECOMSARROW_FORWARD POPULAR SECTORS * Finance * Biotech & Pharma A - Z * Agriculture * Automotive * Education * Energy * Food Service & Hospitality * Healthcare & Payer Markets * HR * Law & Regulation * Maritime * Market Research * Marketing, Sales & Communications * Media & Entertainment * Medical Devices & Diagnostics * Security & Defence * Strategy & Innovation * Sustainability * Technology * Telecoms Browse Topicsappsclose search searchclose WEALTH & INVESTMENT MANAGEMENT Penetrating insights and the right connections * home * Events * Articles & Video * Training THICK SKINS AND TIN EARS: FACING UP TO THE ESG BACKLASH AUTHOR Mark Versey, Chief Executive Officer, Aviva PUBLISHED 28 Jun 2022 SHARE THIS ARTICLE In recent months it has been hard to ignore the growing cynicism towards ESG. Yet, while criticism of the disproportionate claims made by some asset managers about their responsible investment credentials is warranted, condemning ESG in broader terms as a worthless vanity exercise shows a lack of understanding of what it is and there to deliver. Too often, ESG has been used as a generic catch-all position, lumped together with ethical investing, stewardship, or sustainability: They are, of course, linked but are not the same thing and shouldn’t be portrayed as such. In the latest example of ‘wise after the event’ disapproval, some commentators have cited Russia’s invasion of Ukraine as ‘evidence’ that investors have mistakenly turned away from fossil fuels on ESG grounds and are ‘too focused on climate change’. There are a couple of points to make here. First, we were among a number of asset managers that had limited exposure to Russia going into the crisis, largely because of ESG considerations. Second, Russia’s invasion only highlights the critical need to accelerate the energy transition, so that we are not dependent on supplies from hostile and unpredictable regimes. We must form a principles-based view of the world we want to live in and take strategic actions to build it. We do so in the recognition system-wide change is hard, requires sacrifice, and we must accept the short-term criticism that comes with it. Defaulting to pragmatic positions based on ‘how the winds are blowing’ today means, by definition, tying ourselves to the status quo. Reverting to coal, for example, in the face of the biggest systemic threat to the planet (and therefore companies and countries) does not constitute strategic thinking. Investing responsibly is not a fad: It is an investment belief. Companies and governments that conduct their business in a respectful and sustainable way are more likely to succeed in the long term. Bad practices don’t just hit the headlines, they hit the bottom line as well. As such, integrating ESG into our investment process is non-negotiable. Understanding these issues allows us to spot and manage investment risks, as well as capture opportunities. Where we do need to do a better job is in being clearer in our communications when we talk about ESG, especially in explaining the nuances. Asset managers’ approaches to ESG are relative, subjective and non-binary – they are not objective and singular. Being responsible stewards of our clients’ assets is how we can differentiate – because this is where we move into ESG activism. Through our active ESG engagement programme, we believe we can be a force for positive change in the companies we invest in, the economy and society. We’ve been using our voice and influence in this way for five decades. ESG integration is purely investment orientated: It assesses risks and opportunities associated with various ESG factors and embeds them in the investment process. It is pragmatic and appropriate for all clients and strategies, providing essential information to portfolio managers to inform their decisions and drive better financial outcomes. ESG integration does not mean blanket exclusions from certain sectors. On the contrary, ESG analysis is often the critical input in deciding whether we can turn ‘brown’ assets ‘green’. When we are successful in doing this, we believe it will add value to most investments, irrespective of asset class, whether that is pushing energy companies to move more decisively in transitioning to renewables or refurbishing older buildings to increase their relevance for a low-carbon future. Such actions aren’t ‘woolly’– they are commercially driven and allow us to meet our fiduciary duty. Of course, there are times when we exclude investments, and these decisions are driven by values and ethics. Exclusions will vary between asset managers, and their funds, and will be issue-specific and nuanced. An ethical fund is so called because of its ethical policy. To repeat: it is not the same thing as ESG integration. Similarly, “sustainable” is an ambiguous phrase and routinely misused. It is a system condition, not a state of being for an individual, fund or institution in isolation. Sustainability is an ambition and sustainable finance is a key input helping to progress us toward that ambition. It should be acknowledged that achieving a sustainable outcome is exceptionally difficult, hard to measure and requires a system-wide view along with consistent, long-term engagement with governments, multilateral organisations and other policymakers to correct market failures. This type of macro stewardship is another way asset managers can differentiate. Clients that want to go above and beyond ESG integration can select solutions deemed ‘ethical’ or tied into helping deliver ‘sustainable outcomes’. Currently, however, there is no simple and easily understandable scale from light green to dark green in terms of fund offerings. This has created confusion, something not alleviated by SFDR fund classifications in Europe. Customers need clear labelling, and the UK can improve on this with its own classifications. A huge amount of education will then be required to ensure customers truly understand the products they are investing in. It is up to asset managers to define exactly and clearly their values, priorities, and red lines, and how these are embedded within their offerings. Clients can then choose managers whose philosophy, approach, and products most closely align with their own views. There will always be dissenting voices, but by making a concerted effort to better explain the terminology and creating clear product choices, we can put the ESG backlash back in its box. To watch Mark Versey speak at IMpower Incorporating FundForum, buy online access to our new on-demand video platform Streamly >> Find out more about IMpower Incorporating FundForum here >> SHARE THIS ARTICLE RELATED ARTICLES * ESG DELIVERING SUSTAINABLE GOVERNANCE WITH PURPOSE * ESG ESG AS AN ALPHA DRIVER IN EMERGING MARKETS keyboard_arrow_rightMore related RELATED ARTICLES * ESG DELIVERING SUSTAINABLE GOVERNANCE WITH PURPOSE * ESG ESG AS AN ALPHA DRIVER IN EMERGING MARKETS keyboard_arrow_rightMore related UPCOMING EVENT WealthManagement EDGE 21 - 24 May 2023, Hollywood, Florida Wealth Management EDGE is back keyboard_arrow_rightView all events SIGN UP FOR WEALTH & INVESTMENT MANAGEMENT EMAIL UPDATES Country / RegionUnited KingdomUnited StatesAfghanistanAlbaniaAlgeriaAmerican SamoaAndorraAngolaAnguillaAntarcticaAntigua And BarbudaArgentinaArmeniaArubaAustraliaAustriaAzerbaijanBahamasBahrainBangladeshBarbadosBelarusBelgiumBelizeBeninBermudaBhutanBoliviaBosnia And HerzegovinaBotswanaBouvet IslandBrazilBritish Indian Ocean TerritoryBrunei DarussalamBulgariaBurkina FasoBurundiCambodiaCameroonCanadaCape VerdeCayman IslandsCentral African RepublicChadChileChinaChristmas IslandCocos (Keeling) IslandsColombiaComorosCongoCook IslandsCosta RicaCroatiaCubaCyprusCzech RepublicDenmarkDjiboutiDominicaDominican RepublicEast TimorEcuadorEgyptEl SalvadorEquatorial GuineaEritreaEstoniaEthiopiaFalkland IslandsFaroe IslandsFijiFinlandFranceFrench GuianaFrench PolynesiaFrench Southern TerritoriesGabonGambiaGeorgiaGermanyGhanaGibraltarGreeceGreenlandGrenadaGuadeloupeGuamGuatemalaGuineaGuinea-BissauGuyanaHaitiHeard And McDonald IslandsHondurasHong Kong, S.A.R.HungaryIcelandIndiaIndonesiaIranIraqIrelandIsraelItalyIvory CoastJamaicaJapanJordanKazakhstanKenyaKiribatiKuwaitKyrgyzstanLaoLatviaLebanonLesothoLiberiaLibyan Arab JamahiriyaLiechtensteinLithuaniaLuxembourgMacau, S.A.R.MacedoniaMadagascarMalawiMalaysiaMaldivesMaliMaltaMarshall IslandsMartiniqueMauritaniaMauritiusMayotteMetropolitan FranceMexicoMicronesiaMoldovaMonacoMongoliaMontenegroMontserratMoroccoMozambiqueMyanmarNamibiaNauruNepalNetherlandsNetherlands AntillesNew CaledoniaNew ZealandNicaraguaNigerNigeriaNiueNorfolk IslandNorth KoreaNorthern Mariana IslandsNorwayOmanPakistanPalauPalestinian TerritoryPanamaPapua New GuineaParaguayPeruPhilippinesPitcairnPolandPortugalPuerto RicoQatarReunionRomaniaRussian FederationRwandaSaint Kitts And NevisSaint LuciaSaint Vincent And The GrenadinesSamoaSan MarinoSao Tome And PrincipeSaudi ArabiaSenegalSerbiaSeychellesSierra LeoneSingaporeSlovakiaSloveniaSolomon IslandsSomaliaSouth AfricaSouth GeorgiaSouth KoreaSpainSri LankaSt. HelenaSt. Pierre And MiquelonSudanSurinameSvalbard And Jan Mayen IslandsSwazilandSwedenSwitzerlandSyrian Arab RepublicTaiwan, ChinaTajikistanTanzaniaThailandTogoTokelauTongaTrinidad And TobagoTunisiaTurkeyTurkmenistanTurks And Caicos IslandsTuvaluUgandaUkraineUnited Arab EmiratesUnited States Minor Outlying IslandsUruguayUzbekistanVanuatuVatican CityVenezuelaVietnamVirgin Islands (British)Virgin Islands (U.S.)Wallis And Futuna IslandsWestern SaharaYemenYugoslaviaZambiaZimbabwe Sign Up Sign Upclose Upcoming event WEALTHMANAGEMENT EDGE 21 - 24 May 2023, Hollywood, Florida Wealth Management EDGE is back Go to site * * * * -------------------------------------------------------------------------------- * Home * About Us * Our Story * Careers * Contact Us -------------------------------------------------------------------------------- * Cookie Policy * Privacy * Terms * CCPA: Do not sell my personal info Copyright © 2022 Informa Connect Limited. 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