Investing with Purpose

CEO insights on the role of the financial community in advancing important societal issues and collaborating with other sectors.

In a climate of growing political polarization, people are increasingly asking the private sector to tackle the world’s greatest challenges. Asset managers and asset owners are well-positioned to influence the global business agenda, but how can they really move the needle on important societal changes, such as diversity, climate change, and sustainable infrastructure? And how can those efforts best complement the efforts of other stakeholders, such as corporates, governments, and NGOs?

In this Natixis Access Series video talk, Tracey Flaherty, Global Head of Diversity & Inclusion and Public Affairs at Natixis Investment Managers, engages with this CEO panel, all of whom are members of the Investor Leadership Network (ILN):

  • Charles Emond, President and CEO of CDPQ, one of Canada’s largest pension funds; Co-chair, ILN CEO Council
  • Amy Hepburn, CEO of ILN Secretariat, and a globally recognized expert on social impact, with a focus on gender equality, humanitarian action, and the protection of children in crises
  • Jean Raby, CEO of Natixis Investment Managers, Co-chair, ILN CEO Council
Here are some excerpts from the talk.

Asset managers and asset owners have always played a role engaging with companies they invest in. But it seems that activity has increased. What has been the driving change?

Jean Raby: Many of the common themes that are underpinned under the banner of ESG (Environmental, Social, Governance) are concepts that are very much part of investment analysis, and the role of active investors for years. It’s not anathema to good investment practices to focus on strong management teams that behave with integrity, corporates that take into account the consequences of their actions on the environment, a good governance to avoid conflicts of interest, or legal and regulatory issues. So in many respects, these considerations have been part of investment analysis over time. What probably has changed is increased scrutiny on these issues.

I also think we have to recognize that the increased scrutiny comes from the fact that certain issues have come to the forefront, because of the passage of time. The most vivid one is climate change – with increased intensity over the past few years. Now, investors cannot do everything but we all have a part to play.

Charles Emond: The financial sector is aware that by doing the right thing, it can actually foster stronger performance. Coupled with that desire to do the right thing, I think the asset managers and asset owners are realizing that these major issues, such as climate change, are also important risks that need to be factored. They’re real risks. We see them every day on our screens as proof points of these risks, whether it’s wildfires, social unrest in many countries, or lack of access to clean and sustainable infrastructure, which is limiting growth in some countries. So there’s increasing demand from our stakeholders to get involved.

Also, it’s important to remind ourselves that this COVID crisis is accelerating these trends. I mean social injustice became even more obvious. I think the E and the G were a bit more present. Now I think the S is going to the forefront. Also, this crisis is accelerating a lot of trends like technology and protectionism. So technology’s always great, but at the same time, it accelerates wealth concentration, leaving some people behind.

Amy, what are you hearing from players that aren’t in the financial services sector on how we can all work together?

Amy Hepburn: I love the phrase “constructive capital” that Charles uses. I think that’s really the unique opportunity that we have here, and I think it’s what you were stressing as well, Jean – the unique role that investors play. The opportunity really lies for us as investors to come together through this engagement.

It’s around this constructive capital. It’s around values and value. It used to be back in the day, we felt like we couldn’t make that argument on some of these issues. And now, I feel the research is keeping pace. It’s catching up with us, and so we’re able to make this argument quite conclusively. And whether it’s our civil society partners or government partners, they’re looking to us for leadership in this space, because it’s a unique role that investors play through our engagement with our companies.

What’s been the response from companies to this heightened engagement? Are they welcoming it, or are they pushing back?

Charles Emond: I don’t know of any company today who genuinely doesn’t want to be part of the solution. And so when we raise some of these topics with them and engage with them, I think they’re all ears.

It’s not an agenda that we impose upon them. I think if you go back to ESG, their customers, their suppliers, and their whole set of stakeholders actually have the same expectation that they have for us. So it’s a way for them to actually make sure they keep that license to operate in a certain way. I think from that perspective, we sense there’s an important pivot actually being undertaken globally, and a lot of that, companies actually get it.

Jean Raby: I think we’ve made a lot of progress as investors in developing a common language. At least, there’s more commonality around standards, definitions, and metrics. It’s not perfect. It’s still a work in progress.

How much can the financial community really be expected to do, realistically?

Amy Hepburn: I think the expectations are high, and they should be high. But I think the word of caution here is that, as the private sector assumes responsibility, it doesn’t mean other sectors abdicate their responsibility. I think sometimes that’s how it gets set up in the conversation, and I think that’s a false dichotomy. I think it’s that as we assume leadership, we bring others with us.

Charles Emond: Obviously there’s a lot of expectations on the financial community. But just tagging along doesn’t mean other stakeholders actually abdicate. Like governments are good at certain things, not as good on other things. That’s where we can actually help. I mean, governments are usually best suited to set conditions and remove hurdles. But maybe it’s not as easy for them to drive real change super fast on global issues.

Jean Raby: When I think about areas where governments, asset owners, and asset managers can actually be brought together into a concrete solution, it’s in the area of blended finance.

We’ve seen this really at an increasing pace in the field of natural capital, ocean preservation, land restoration, Amazon protection. I’m confident that if we think collectively about putting together these types of solutions and approaches in other areas, we can expand the scope of investment opportunities.
All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor's overall performance depending on whether such investments are in or out of favor.

This material is provided for informational purposes only and should not be construed as investment advice.

Unless otherwise noted, the opinions of the speakers are not necessarily those of Natixis Investment Managers and are independently responsible for their expressed views and opinions. The views and opinions are as of September 15, 2020 and may change based on market and other conditions.