A few words on ESG from a Management Company perspective, by GemCap UK Chief Executive Stuart Alexander.
Not another 1000 words on ESG, I hear you say. Everywhere you look these days we see ESG being bandied about as well as terms such as “greenwashing” as Fund Managers try to jump on the latest requirement, either because of regulatory requirements such as Sustainable Finance Disclosure Regulation (SFDR) or, cynically, a sense that this is a marketing opportunity to grow assets. I personally applaud ESG as a concept and having lived a career in this industry where the development of this style of investing grew from Ethical Investing in the 80s and 90s to Socially Responsible Investing in the 00s and now into ESG, it is great to see the idea really take centre stage.
It has now become not just something we create for investors but something that investors are beginning to expect in their portfolios. The real challenge for many businesses is not identifying companies to invest in; they are easily identifiable using lots of different metrics and companies offering services to make it easier to identify the stocks. The biggest challenge is actually whether the Asset Manager or Management Company adopt Environmental, Social and robust Governance practices as a core cultural element of their business.
The European Union (EU) has set in motion an ambitious legislative programme to make ESG concerns a central plank of regulation in the financial services industry. As part of this package, the Regulation on sustainability-related disclosures in the financial services sector (the SFDR) was published in December 2019. Much has been discussed about the financial products produced by the asset management companies as well as those Advisers who buy them on behalf of their clients. This sustainability initiative is as part of the EU’s response to the Paris Climate Agreement and of its own commitment to supporting the growth of the UK’s financial services industry, HM Government listed the Framework Regulation, SFDR and the associated Low Carbon Benchmarks Regulation as EU legislation which will be ‘on-shored’.
But how does a business respond to this? Many firms have really embraced it at a cultural level, and it is driven by both the executive but also the employees of the business. Peer pressure or reflection is also a key driver as no one wants to be identified if the spotlight were to fall on those not playing their part in this global initiative. Some of the largest Asset Managers have made some great strides and all credit to them for leading from the front.
At GemCap we too are embracing the ESG concept, as not only is it good for the planet, but it is good business practice, and it delivers excellent returns for the company. Not exactly altruistic I admit, but a company that delivers great returns with employees that are empowered, engaged and excited by working for the company can only be a good thing. I remember one of my previous bosses, Dougie Ferrans at Insight, said to me on our first day when we launched the company: “Stuart, our job is to ensure that when everyone leaves at 5pm on Friday night that they return at 9am on Monday”. He also had some wise words about suppliers: “Treat our suppliers as if they are customers, for without either we have nothing.” These words, along with my own view that if something is not quite right then don’t do it, are part of what we at GemCap are about. We care about stuff that matters.
So, what are we doing? Here are a few examples. Well firstly on the E, we are planting trees and ensuring that the office environment meets the requirements that support our environmental credentials such as waste, water usage, plastic use etc. On the S we have introduced Charity/Community support days along with matched donations to the projects that our staff support. Staff will be encouraged to get involved in these projects by spending time supporting them on company time. We want them to give back to the community and as a result enjoy their time with them. We also match donations for the charities/community projects as long as the staff member is engaged with them. We want to ensure staff have the opportunity for personal development and want all staff to benefit from opportunities in training, exam achievements and enhancing their knowledge and overall self-esteem. Finally, the G. We work hard to ensure that we have Diversity, Inclusion and Equality as core principles for the business and to demonstrate that we must embrace all aspects of this.
- We are in the process of signing up for the UN PRI
- We have adopted a zero-tolerance policy on Bullying and Harassment via our Policy
- We have adopted an Equality policy
- We have adopted a Code of Conduct for all staff that ensures we all put clients first and that we maintain high ethical standards at all times
- We have adopted strong corporate governance Board reviews to ensure we have diversity and inclusion at the heart of the Board
We are driven to ensure that we have diversity across the whole business and not just on gender but diversity of thought, diversity of experience and diversity of background. That way we create a truly balanced business that reflects society and the world we live in correctly. As I often say, I have been cloned once already, having an identical twin brother and the world does not need another one of me! So, let’s embrace our differences and respect them to enhance collectively what we provide to our clients but also to ourselves. We will be richer for it on all counts.
Clearly there is much to do, and we must ensure that we are not just greenwashing in another guise but are actively working with our colleagues, clients and suppliers to deliver the right outcomes for everyone. It’s a long road we have to travel along but we are determined to make this happen for everyone’s sake.