How to implement ESG throughout the governance chain

5 February 2020 Posted by: Patrick Woods Posted In: ESG and impact investing

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Yesterday morning Avida International hosted its spring London roundtable entitled “How to implement ESG policies throughout the governance chain.” Twelve very senior participants from pension funds representing more than ten percent of the UK pension market joined us for an animated discussion. A big thank you to all our guests for your thought-provoking input.

The discussion was very lively and some observations were especially intriguing;

“The E is very much in focus currently with huge popular momentum behind it.”

“If you get G right a lot of other good things follow from well-run companies.”

“Measurement of outcomes is a real problem.”

“How do we turn these well-meaning statements into action?”

“I feel very strongly about all the green-washing that is currently going on.”

“How can we implement ESG in a charge capped DC environment?”

“The problem with regulations is that it forces investors into box-ticking.”

“Implementing ESG policies is a journey.”

The main takeaway from the event was the observation that asset owners should start out on this journey by asking stakeholders the question: “Is managing ESG risk consistent with carrying out our fiduciary responsibilities?” To which the answer should be a resounding yes.

Once that has been established and agreed, the second step of the process should be to set the policy governing management of assets, with the final stage being how this gets implemented and reported on.

And because it is a journey, continual monitoring will be required to ascertain what changes may need to be adopted in light of an ever-evolving external environment. The success of implementing ESG throughout the entire governance chain is recognising that it is not a one-off exercise but that it requires taking all stakeholders on the journey.