Fund Selector | ESG

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  • 47 mins 10 secs

Top fund managers and fund buyers join this panel to talk about ESG & impact investing, and discuss the crucial developments in that market. Taking part are:

  • Simon Bond, Manager, Social Bond Products, Columbia Threadneedle
  • Stephanie Maier, Director - Responsible Investment, HSBC Global Asset Management
  • Rachel Whittaker, Sustainable Investing Strategies, UBS Wealth Management
  • Victoria Leggett, Head of Responsible Investment, UBP

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Fund Selector

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Hello and welcome to this live european fund select a round table with me, marco, get we are bringing together top for managers and fun buyers to have a look at the impact investing in what the crucial developments are in that market. Let's, meet our representatives from the fund manager community. First of all, they are victoria leggett. She is head of responsible investment ubp simon bond, whose manager of social bond products at columbia threadneedle and a phone manager on stephenie meyer, director of responsible investment at hsbc global asset management on representing the fun bars, were joined today by rachel whitaker. She is a sustainable investing strategist at ups wealth management. Rachel has got eleven years of experience in sustainability eighteen overall in the investment market on dh she works out of zurich and ups wealth management has got some two point five billion swiss francs in one hundred percent sustainable portfolios on behalf ofthe clients start with can you tell us a little bit about where sustainability fits in with cbs wealth ? Sure. Well, sustainable investing is an important topic for the whole ups group on as a group, we have more than one trillion frank's. Invested in sustainable investment strategies of all different types, but we're seeing a particular growth in interest from wealth management clients. We're seeing more of an interest from private individuals in wanting teo apply the values that they having, their personal life, the values that they apply to maybe purchasing decisions or to the lifestyle decisions to also apply those to investing. So we offer advice on how to make their whole portfolios sustainable on. We also offer them advice on how to whether to invest in sustainable funds whether to invest in single securities so we have one way have purely sustainable products, but we're also moving towards integrating aspects of sustainable investment into all of our investment processes. So our analysts looking at sg criteria in their stocks and bonds analysis on our fund analyst starting to think about how did they assess whether the fund managers that they're selecting our integrating into their investment processes ? So where is the most important thing is giving clients options to fit their own values ? I'm just very quickly on the sg. How would you ? I mean, how would you define the estrogen ? Is it something that's now going to be ? Available across the piece to any client it's just good practice on sustainability specialists leave way see sustainable investing as any investment approach that incorporates values or environmental and social aspect. So they're clearly many different motivations for doing that, and we broadly separate them into three buckets. We have the exclusion approach, which is primarily about values alignments, the integration approach which covers a very wide range of approaches, which is about china, make better investment decisions, as well as the line with values. And then the impact bucket, which is about china. Use our investments to generate a positive social or environmental impact as a direct result of your investor. Thanks, victoria, of those three buckets, what do you do at bp ? Well, i have two hats of evp, and i'm the head of responsible an investment for the asset management division on dh i'm also fund manager, so i run the positive impact equity fund way took the decision tio combine the rolls because we really feel that sustainability is at the heart of our investment decisions and it doesn't sit in a silo. Dwayne it's a some bond where does sustainability fit within columbia ? It's very similar, actually to victoria. So, again, i'm actually running funds in this case, bond funds, social bond funds. But that it means that i've moved effectively from a traditional fund management background to specialize in the social bonds. But actually, that spectrum that you were talking about his present at columbia threadneedle as well. So we are looking right across the spectrum, from integration through to exclusions, and then to the leading edge products, which probably represent which immortals impact. Stephanie hsbc, global asset management again, do you cover the whole waterfront on on this ? Yeah, so they're starting point was very much integrating environmental social governance issues across what we do. So we want early signatories to the principles of responsible investment on very much as top down commitment, how we integrate the relevant environmental, social governments elements into the different asset classes and the different investment processes within within those asset classes. Having said that, we were also one of the head one of the earlier sarai funds in two thousand one and have continued to evolve and develop more specific sustainability themed funds or funds that address some of the issues that rachel was outlining before whether that specific client mandates where they want to apply more of the values for the funds that we offer, which very much more sustainability, themed or positive screening, how much of when you're providing products client is this third party funds that you're reliant on ? How much is it that you create yourselves ? A large part of it is distributing third party funds way do have some developed in house by cbs wealth management, but we have a large team. Of fund analysts and focusing on doing to diligence on third party managers on dh on boarding most funds and the weekend then and advise our clients on which one's fit into their personal profiles. So thie due diligence on the sustainable investment funds is done by the same team that is in the diligence on the conventional investment funds were playing exactly the same criteria from a financial perspective, but then also additionally, trying to understand what's the fund managers philosophy behind a sustainable investment fund. What water that, what are they trying teo generate in terms of impact ? If it's an impact friend or the sustainability benefits, or what kind of values in china aligned with one of the difficulties is that every fund manager and every investor has a different interpretation of what sustainable investing should be. So these conversations going to quite a lot of detail into how is he your philosophy embedded in the investment process ? That's usually the first question that we're that we're asking, how is your philosophy thie investment process specifically for impact ? Sure, well, i'm the process is impacting listed equity is relatively new, so we've tried to take some of the criteria from were impacted originated in more more of assignments type of markets and apply those two are investment process. So considering factors such as addition ality, which is sounds strange when you're talking about secondary capital but a lot of companies and that we would consider impact companies have got very strong innovation patented process is that unique in their field, so we're approaching addition ality in a slightly different way and on dh, then also the intentionality and materiality of those businesses, so traditional ways of looking at impact, that authority embedded right from the beginning of the process, thanks from your point of view something particularly social bond products of mention therein, the adoption what's, the philosophy behind those how does how does that translate into what you'd be doing ? The investments will effectively what we say that any bond could be a social bond if the use of proceeds goes towards positive impact on society. And so it's not just limited to the branded social bonds that developed after the social bond principles. Man on the second of june two thousand seventeen, we predate that actually, so i've been running funds for nearly five years. So that predates social bonds, but basically that's what we're looking for to follow the money through to the effect that it has on society to encompass the externalities in economics and internalize those externalities in the decision making process. Are you able to do that with conventional bonds to be able to track that use of funds ? Because that's something that we find difficult, i think i can see the challenges on the equity side of things, which are also trying to spread breast practice acceptable with bonds, you can have security over physical assets or particular cash flows. We now have the development of the green bonds, social bonds, sustainability bonds where there is specific use of proceeds covenants, but actually a lot of what we're doing in terms of where that money is going. The evidence to prove what good it's doing comes from engagement. That's, much more like with an equity fund manager would be doing is meeting with the issuer, asking awkward questions, getting answers back and trying to source that evidence we'd say around about eighty percent of the evidence that we find, the measurements that we find come from engagement with actually companies. Themselves, i would echo that way, find a very similar proportion. Engagement is it is absolutely critical as far as we've discovered an impact stephanie, from your view, when you involve, does it matter whether you've got a vote behind you when you have that engagement ? So i mean, son was talking about being a bond investor where there isn't a vote there, there is if you hold the equity, how does that power make a difference to the conversation ? Yes, i think we can look at our stewardship responsibilities much more broadly, and clearly when you're looking within the equity space, you've got specific tools, like the voting at the gm, you know, specific votes on reelection of directors, et cetera, you know, access to attend the gm so that's a clear point of or tool for engagement there, but we're seeing a lot more that within the corporate bond to certain extent, also within the sovereign bond space, we're seeing direct engagement there. One of the interesting elements there is that in many cases, because they're not public disclosure that they have in the first place is more limited because they're under different reporting requirements in the uk. Actually, they've been recently looking at whether we can expand those reporting requirements for corporate for private companies specifically, but but we very much saying jj mint is part of the investment process, both pre investment understanding the risks, understanding the company on d once were invested to ensure we understand and can influence how that company manages a broad range of both, you know, the standard financial elements and environmental, social on governance issues. Given the size of bbs judgment, when you look to a third party fund must be capacity issues. How big do something needs to be before you could buy it ? I mean, that's a pretty open question. Actually, we have seeded new funds where we've been looking for a particular type of strategy in this is the initial investment space haven't been able to find something that matches exactly what we would be looking for from the chief investment office on dh then our fun team would you would identify the managers. You have the right kind of capabilities and we would at sea that fund so it's, relatively small. But i think the capacity issue eyes one of the reasons why we still have dedicated, sustainable investing solutions, we often get asked, well, if you really believe that sustainable investing khun generates market rate returns, a swell is the lining with values or as well, a sustainability benefits wise and everything sustainable. But many of the products that we see out there, particularly in the bond space where there's still less available than inequities, just wouldn't have the capacity to be able to put it in a love our conventional solutions because we are the biggest global wealth manager just isn't enough capacity there, but in the one hundred percent solutions we can look at relatively small fund, i don't get too excited. But if you if you seeded a fun, how much could you what's the most you've ever put into a funders ? I don't know off the top of my head with the numbers, but that's always a conversation with the fund manager, they how much investment would they need to be able to start that if we're asking for them to do something that's going to require them ? Tio hire more people is going to cost involved than it has to be worth well for them as well. So it's always. A two way conversation picking that stuff. How do you know what ? That if you've got somebody wants to please plug your funding to our platform where you be hassle credit, suite's someone someone big. Is that just a one way or other issues around that on howyou service that business ? How you could keep insurance quality ? Yes, two elements. One is obviously how do we have organization of cbs offered the funds we already have ? Because i think one of the issues, particularly this market, is how we get access and how the end customer has access to these types of funds. I think that that works usually important and began to sign, post and educate and raise awareness from for the client around what is available and making options available. So i think that's that's one piece that's important. I think the other element around, how would we work together to develop fund we at hsbc global asset management, obviously part of border hsbc. We have real retail banking, wealth management as well as private banking. And there we have developed funds for clients off those those different business areas and, again, that's a similar dynamic. And it wears the demand you know what what's the size what's the scale except her. And as she one of the things we've looked at is on that point about the scale ability we lanced last year we launched to lower carper funds. They were actually based off our standard investment process, but we're looking at targeting fifty percent lower carbon footprint than in the alternative on dh that that prevent presents something that's very scalable. Where is obviously if you're looking at something that's a bit, mohr has more restrictions on it is more values driven rather than yes g risk driven then you're going to end up with a different style and size of portfolio some for you. How easy is it to if someone gave you another three hundred million pounds or euros ? How easy is it for your product to digest ? Because your uk fund is only one hundred million pounds inside ? Roughly speaking, we've got a uk found uk said she found a european social bond fund and now we've got a segregated international bond fund which is is more global. How easy is it that that's relatively is in terms of the secondary market, but that doesn't really provide impact. We regard that as an outcome because where it's really impact is in the new issue market where the money goes to the borrower of the borough, then spends in society just passing that around the financial system it rewards past behavior, promotes future good behaviour but doesn't really have that on impact. So over time we would move out of those secondary positions into new issues and try and encourage new issues. Currently, we regard actually, the bond market has a much, much wider spectrum of things that do good in society if you go from universities to charities, housing associations right the way through to super nationals agencies, etcetera, etcetera, none of those simply have common equity, but they all issue bonds. I was talking to new south wales hold of new south wales thie issuing entity of new south wales about potential agreed on from them that's the kind of thing that we could get in the bond market and they can be fairly large size issues so it's more concentration issue rather than an absolute size issue. I think this is a really interesting point that you raised about certain types. Of one's being more impactful than others. This is one of the issues that we have been trying to explain to our clients where on the spectrum of impact value's alignment, different investments fit on dh in one of the surveys that we've done of our clients, this show is very strong interest in sustainability and strong appetites investors who are not investing sustainably to do so in the future. The most common reason cited was a lack of understanding about how their investment could actually make a difference way we find that that's often not well communicated in this office also there's an issue around different terms being used in different ways. But thiss issue of primary market being more impactful the second secondly market is one that we do use and will be may be interesting to dig into that with the other funds as well about how you communicate, um, how you're generating impact or how you're investing companies are with plants, and i see the impact universe. I'm speaking from an equity perspective, but i see it is a whole umbrella for all different types of assets that would suit any given client and absolutely allying. Their values with different ways of accessing that, and but impact tan gently and with equity for me also means that an accessibility issue so what ? You may lose on direct, measurable impact that you would get from project you gain in in the sense that this type of investment is available for more people in a broader way, and i don't mean to die in the sense of thie impact is diluted, but it is clearly different, but i think there's a place for all of them, i'm in a sort of basket if that makes sense. You mentioned engagement earlier as well. Would you see that as a key way of making change happen ? Absolutely. And i think certainly for impact in this inequity, i think to an extent it applies for, alas, sets closest, but given its recognized in the industry that we have an absence of data in terms of non financial data, and certainly the comparability of that data is is lacking. Engagement is okay, not just a tool to find interesting candidates. Teo, help them come along the journey, but also to help us measure so quite often, and we with our dialogue with cos we're extracting non financial kp eyes that we wouldn't do from screening tool from their css reports. Through that relationship, we are building a much more complete picture of a business and holding them to a count on those factors over time, we already touching on it as a topic so let's, move on now to the second part of our debate around data collection on management. Justice will take a step back on it first. Rachel, how do you collect on measure you reliant on third parties to forward it to you ? Sophie b s wealth management overview process way don't collect raw data on corporate sustainability when we are distributing funds, we are, you know, reviewing the investment process off that manager and once we're comfortable with, um with delegating complete what authority to them they were putting trust in your process, whether it's, the selection, whether it's, how you vote approx, is whether it's what you choose to engage on when we're advising on a single securities, we do use data from external data providers, but with an internal methodology. So that way we retain control of those decisions on we can fully explain to our clients why we're recommending the securities that that we are within for sustainable portfolio hsbc stephanie, do you rely on internal data when you you used the party ? I think there's two elements, i think there's how'd we use data in part of our investment decision making process ? So there we do pull a multiple data sources as well as our own analysis. We simply have our own proprietary waiting system where we combine external data t create our own assessment that's obviously supplemented with information we get directly from from engagement on dh that helps inform our investment process. Now, when we're talking about data in terms of reporting impact so to your to your earlier point, i think that's a really interesting area and i think again, you can look at that in terms of being clear around what's, just the profile of the funds or the assets that you know, the client's invested. And so whether that's looking through aggregate sg schools and there's a lot, we need to do to unpick those because they cannot be black boxes quite quite condense. But do you have the advantage of atleast presenting a a single figure that can help at least compare to the benchmark, for example, all the way to where we need to be getting to where i think we need to be getting to, which is a lot more of the direct impact. So how many tons of carbon were saved doing this rather than doing that ? And i think that's where you're also seeing some of the more interesting asset classes, so not just green green bonds where you have the use of proceeds, but looking at infrastructure looking for these other elements where you can actually start understanding the direct impact for those investments. And i think your point about that's what the the end client would like to see it ? Absolutely i think they want to see the transparency on the process off the investment, and they want to see the outcome and original for victor if they come and say, we've done this and it's worked really well and we've measured it. Look, it's got a score of seven out of ten it's great. I mean, how do you dig under that what's the challenge you then set back to them so that you understand it. And you know it's not just a bit of green washing. Yeah, way with any of our funds, you diligence. We're having face to face meetings with fund managers, and we're digging into the process and wanted to know exactly how you get, uh, from you know, these vore inputs, whatever they may be to your final stop picking decisions or one picking decisions and how you construct portfolio the's all pretty standard things that fun selectors looking at and it's exactly the same for the for the eyepiece, but understanding how you decide how something is sustainable, um, but then also understanding how any kind of measurement goes alongside it, the impact measurement on also figuring out where it fits in within within our investment buckets that we have because it is difficult for clients, teo understand what the different terms mean when they used to different ways by different managers, generally most secondary market investments we would put in the automatic market rather than an impact bucket, but there is an exception the most impactful area ofthe secondary market investments for roses around the engagement piece that we've talked about, and we see that as an air of great potential where investors khun you behave in a kind of private investor way with their public market investments. I think one of the areas that is lacking in the engagement piece of the moment is how to measure the impact of your own investments. So i think you talked a bit about how you can also use engagement's. Teo gain more insight into her into measuring what the company's impacted, but where we'd like to see more work within the industry is investors monitoring how their own actions have created change, which is a much more difficult thing to do. That's what she wanted. The areas that the revisions this year chip, k tuk stewardship cages looking at its real understanding not just water, the policies and processes. But what of the outcomes ? And how do we assess the manager's ? Start communicating what those outcomes are and the challenge around engagement is always that you are one one voice working. And, you know, in an environment where there may be many voices, you know there is changing regulation. There are there is civil society. There is their own customer base of a company, for example, that may influence particular, you know, change in policy. Behavior, but for us, it's about being very clear where we have an engagement objective, what that is objective is being clear with the company around what that is, and then being clear if we achieve that that that's happened, what we i think what we're very cautious about, it is claiming sole responsibility for that for that change and for that outcome. But i think at the moment where we are, as we can say, that this is what we set out to do, this is now what's happened way played a part in that, but we can't claim full credibility for that. But i think the more that we see that in in the public domain, i think the more will weigh will evolve better ways of communicating and measuring those engagement related outcomes. I'm picking up on that song to that point, i think the thing in the battle of britain where they worked out, that if you talk to every fight about it, ask him how much stuff he shot down. It was about three times the number of things that had been shot. Everyone saw it from their own perspective. How do you work out ? It's, columbia threadneedle responsibility and we were one of the team involved. I think the important thing is being at the leading edge way are innovators. We are past finders, almost in what in the way that we approach it. One of the things that we have difficulty with is everybody focuses on the of the of course i'm running a social funds it's the you can't separate the if you get this wrong, the environment, wrong, it's, the biggest social issue that you can imagine. And so one of the key things to do is to in terms of what we're looking for from bond issue. The difficulty is how do you judge the value of education to society, measure it and respond to that or health the benefits of health to society ? And so one of the things that we tend to find his people are scared of the measurement side, what we ask people to do is basically particularly with project bonds and things like that set out your criteria for success or failure of the start of the project and then measure yourself against it, and we will track that going forward and by doing that. Effectively, what we'll be doing is giving you a little bit of a license to say, well, that should be the impact that it creates over the next five years, ten years and with bonds, of course, could be thirty years. And then we will measure across that it's a basic scientific principle set out to create a successful failure and measure yourself against it that's kind of turning the tables back on the issuing entity itself in terms of well, okay, what good do you think this project will do ? How good do you think it will be and then come up with your own measures ? And the key thing about that, of course, is when you're moving from the it's, not just about carbon or those things that are consistent, you would have different measurements for education, for social housing, for for job creation, etcetera, etcetera, but it's encompassing those when you talk about a seven out of ten it's encompassing those on a consistent basis to make it comparable across those different outcomes. But we also have to help us social partner in each of our funds. A social partner in the uk fund, for instance, is big issue, big issue invest in fact, who you will know from the from homeless people sending the papers on the streets. They are on entrepreneurial approach in the way that they actually round those charitable exercises because it's almost like episode of the apprentice going and stocking up, selling those papers, going back and restocking with profits, they get economics, use economics and that's what we're doing, we using economics, we using a market based approach on what we're trying to do is extract that information in terms of evidence measurement to us, it's, just evidence we'll take evidence from wherever we can find it. Do you find that there's enough choice arranged within the the universe that you would consider social bonds or to have the potential to be social bonds to build a fully diversified portfolio with the kind of returns there going to be attractive ? Tio it's called mainstream investors as well a sustainable investing. That was the question the big issue asked me the very first meeting we had with them, of course, five years later, nearly five years later, my answer would be yes, there are some style biases, but what i do basically is recognised the biases and try and mitigate through the way that i build portfolios. So of course we don't have tobacco companies, we don't have rules, we don't have arms manufacturers, etcetera, etcetera, but if you regarded tobacco companies and non cyclical investment you can look at maybe utilities is an alternative nonstick little investment, and you look to mitigate those effects, and all i can say is that we can prove that better now than that. That very first meeting with big issue when it was yes, we don't have to sacrifice financial returns in order to achieve these outcomes. Now we can prove that you don't need to sacrifice financial returns in two in order to achieve these outcomes. But when social housing as well, we do well, it's one of those core elements to fund, and so there are some style that come out of it. The biggest style bicycle is that things that socially air doing good is a style bias, it's a thematic approach and say you have to kind of accept that. I think oil companies do well, you probably wouldn't expect fun to be doing as well as those kind of investments. That they're taking another funds victor from your part ofyou. Other particular style basses that inherent in the impact investing that you did ? Yes, there's a a natural similar to simon way. Don't tobacco the brewers also, there are very few financials way struggle to find and financial businesses that past sufficiently they're sufficiently impactful to be included. I'm you invest in bbs. I could we don't not in the impact on, but there is a danger of an accidental style style, both with an impact from certainly inequity and that is that you accidentally become a renewable energy fund. You accidentally become a biotech fund or a health care fund, so our way of mitigating that is via dunst, jesus state sustainable development goals, which have become, i guess, a sort of de facto blueprint for this area of the industry. We have put the first fifteen of these into six thematic buckets, half of them and environmental, half them social the idea being that these these are broadly equal waited, and so we don't find that one particular theme takes over the fund. That and that's how we address the diversification rather than three classic kicks sector i got to come back to you in a second, but i want to move on now to the third and final part of today's program, which is about future developments when it comes to sg product and also for those in the sustainable impact space you're sat there ups wealth management thinking about what you by now, you must be spending some of your time thinking about what you'd like to be buying in the future. What where the challenges you've got for the fund managers. Yeah, wei have this one hundred percent portfolio approach where we switch outs, you know, traditional asset classes replace them with more sustainable alternatives on its approach that really wouldn't it would have been possible ten years ago when they just weren't as many options around, so we have green bonds in there. We have multilateral development bank bonds, we have different approaches on the pretty side, but there is still some big gaps in there when compared compared with conventional asset allocation, so we don't have anything. We don't have any hedge funds in there, not because we think hedge funds are inherently not sustainable, but because we just don't see the products. Out there at the moment that i met the kind of sustainability criteria criteria that way we're looking for we don't have any high yield bonds in at the moment on it it's a fully liquid portfolio where it's if we were trying to recruit the whole range of impact investments as well, a sustainable we might want to have alternative would say on the liquid side, thie high yield on peace and hedge funds are areas where we would be interested to see new products innovation we're thinking about what we would be looking for, but also interested to find out from fund managers. How they see those areas of all high yield aspect is difficult is your question was in terms of diversification, we have high your bonds in what is essentially investment grade portfolio, so that would be my response to that in order to get the diversification, you can't do it entirely with high yield bonds, but we do have pure jamie's, a single bee, low cost jim provider, etcetera fabric in terms of the more european exposure exception, these high yield bonds within the context, predominantly investment grade portfolio always in the box just stand. Sorry, why couldn't you create your high your bumble ? If there are clearly high yield their summits point being in terms of when we first did the analysis of the investment grade market, we came out with thirty four percent of the index. We regard it as meeting the eighty years of social outcome that begins. You gave us therefore being social, so thirty four percent is diverse enough ix sector and that was the key to the to that kind of question. Okay, it's big enough, but is a diverse enough ? I think in the high your market, there are pockets of really good and elements good cos except of course, we have the retail charity bonds, which are underrated, which are in that kind of crossover area. But their pockets, i think, to build a portfolio that looks and feels and smells and performs like a typical corporate bond fund. That's the game that's to deliver the return should expect for the risk you're taking, which is what we're trying to do that's more difficult where they're just pockets where you can create the diversification. I'm sorry you mention hedge funds there as well. Yeah, but i was also going to have a question for the equity managers in that wei have different approaches to sustainable investing in our c i a asset allocation, but still that the vast majority of equity s iphones are very much focused on the best in class type approach and only having good companies on what we don't see. So much of this kind of different ways approaching the topic, like trying to identify the companies that are improving, maybe trying to capture more of the value that way it is that something that you have been and your process ? Yes, i mean one of s o we've recently launched a sustainable marty asa fun to watch you two to funds with different mixes and risk risk profiles and simile. There was a challenge around the fulfillment and ensuring this sufficiently divers, you know, portfolio that meets a range of different sustainability criteria as well and that's the approach we we looked at, so it wasn't just looking at best in class, we're also looking at through dramatic in terms of overall lower carbon, the intensity of the portfolio relevant relative tio tio benchmark way are starting to look at what the other stiles within that ? Yeah, within that are i think one of the challenges is if we want to communicate, teo, our customers, and we did some research. Actually, we were in the lead up to the launch of the fund around how you communicate what it is if you think it's challenging to talk about a single fund in a single asset class and what the sustainable investment approaches having something that unifies across different asset classes on different approaches, ads that extra layer of complexity. And so actually, one of the things we've done is brought in a just not sustainable investing label that helps to communicate particularly to the end, klein what it is that they're getting, and to be able to differentiate some of these different styles and saying, well, it's it's more than just yesterday, integration replies to integration across all that we do, but for it to be sustainable were saying that at the front were targeting these types of, you know, these types of companies on dh just to pick up on the diversification point earlier, i'm really simply protect peace research on active, systematic strategies and there how do you reduce your carbon risk exposure, but without just xing out a ll the fossil fuel companies. So you actually still have that diversified approach, but you have significantly reduced your common exposure by looking at those companies that are are less carbon intensive relative to their peers, rather than just saying no to all these activities and all these thieves subsectors very quickly actually, talking about a lot of people have got best in class product if you got any evidence that if you take cos the sinners and becoming saints, you get a better return than just buying into a sustainable site. Well, a lot of the data agencies have been doing research on this, trying to look att if you look at trends in ratings upgrades and so on, whether that helps. I mean, i think that's very difficult to do in a quantitative way. But if you think about a traditional value approach to equity investing and looking for the companies that are undervalued, or maybe that and you expect to improve in the future, that could also be applied to a sustainable investing approach. One of the barriers, maybe in the past, has been the if you have sustainable investors who have very strong ethical beliefs and just don't want to be in companies that are not the best you end up with this focus always on you know, the companies that are the leaders in the g but from an investment perspective where we're trying to look att s g and the returns potential, there are other ways of doing it, but i think we're starting to see more managers exploring, but maybe not quite so many products out there yet to agree with that what we always look on the financial side we look to replicate on the social side and what are we doing on the financial side ? We're looking for the writing stars for what else finds out we're looking to avoid the falling angels. We should be doing exactly the same on the social sustainability side, so that momentum that transition, for example, dong energy, which is no longer called dong energy because it's not oil and natural gas, and moritz or state that momentum, that transition except it's spotting that early before you get the lights of msc, etcetera, etcetera, upgrading them and that's part of active management and that's very much. The focus it's also i'm trying to unpick, and we've done some concept research on trying to understand the value drivers were yuniesky because most of the academic research, or or other research that you see, is very much looking aggregate tsg schools. And we said before there's an awful lot under there and some of those elements of more or less relevant, so actually being able to pull out well, what is the key factor compared to the other factor styles that we would express ? We've looked at for carbon and handsome, some very interesting results, but going beyond that, how do you how do you create ? And had you identify where those value drivers are, you know, within a broader set of e s and j factor. So you actually understand what's driving that performance, not just a sort of good companies that are good are good, which which is so far a lot of the active research has been set up ultimately proves those correlations. What did you pick up ? You mentioned hedge funds. Victoria put the twenty. Why don't you think anyone's produced decent hedge funds in this ? Yes, yes. All right, i am. I have. No idea, i think i think in part this certainly since the origins, not quite the origins, but the world of exclusion, we've all moved on a lot and i think there's a big focus on the positive on dth e improvement on dh i think there is probably and slightly thorny philosophical issue with them with the shorting element off s r i s d hedge fund, which it zo circle i haven't squared yet, but i'd be interested in your view on that. I think that one of the issues i think that's one of the difficulties we had, we haven't defined what we think a sustainable hedge fund should look like. We've gone out there and looked at hedge funds and look to the ones that have started incorporating elements of sustainability in their process and just found that none of them really gave us the level of comfort to put it in a portfolio approach that we describe is one hundred percent sustainable. So that's not to say that there are there are some hedge funds out there that have more sustainable approaches and others and disco sustainable issues don't work as well on the short. Side there's a very wide range of hedge fund approaches you khun see, you can intuitively see how it might work in a kind of a long short equity fund, but when you start including other types of investments and different structure products and so one then it gets that much more complicated. And if you do take a structured products, should you tie the sustainability to the underlying instruments, even if you don't actually only issuer on, then you do get into all of these difficult issues, so we're we're also trying to learn from the fund managers and not necessarily looking for one particular approach. Yeah, i mean, that's something we've been looking at, i think we need to recognize that actually in some how we invest, i what are the instruments are, you know, are relevant as to what we're getting exposure to. So you know, the use of derivatives or the what is the difference between physical asset and synthetic ? I think our relevant here because what we're trying, teo, the impact you're trying to achieve is around directing capital, and if we're not actually, if the fund's structure, the instruments being used aren't in fact doing that aren't sending market signals, aren't adjusting the flow of capital away from less sustainable companies and towards more sustainable cos then i think there is a question whether that can ever truly be sustainable. And so i think in that that sense, i think we need teo teo question the how, before we look at the what, um, to address that and recognize that, you know, perhaps those certain investment stiles just don't don't fit within those types of strategies. I'm nothing for high yield the question slightly different, it's more of a kind of what's available because, you know, a lot of the higher companies are, for example, you know, the shell well, she national coming from the us and you know, that there's a number of reasons why you may want want to build it with dancing, you mentioned there is derivatives, and first we have to develop andi usto responsible derivative products in fact, we were challenged to do that by one of our investors, and so we have got a six point approached the derivatives, but actually, the impact of those derivatives is neutral because we're going to the company really great questions just come in. So i just wanted to get this across quite along. One of the panels used the phrase spectrum in reference to sg investment from a pension scheme. Trusty perspective. There will soon be the requirement to declare sg considerations in the schemes investment strategy. I'm interested to get your opinion on whether spectrum still applies. When this legislation comes into force, will the definition of sg investment become narrow ? Well, do you have a quick cracker ? The first it's ? Really ? The it's really ? The element that i was talking about in terms of it's basic economics. If you encompass social costs and benefits within your analysis and within your investment policy, then as a society we will allocate resources in a more efficient equilibrium. We will allocate resources across the economy better, more better equilibrium point and that's. What ? And that's what that really is all about in terms of the spectrum, the way that you do it, which i think is what the question is all about. You do have a choice. And that's absolutely right as well you can. You can't just have negative exclusion. You can have positive inclusion, impact whatever you want to call. It. But actually, trustees will have a choice as to how they will implement that. With that in mind, pick your own. You can pick your own version of the suv. Was your consistent on one other question ? This is this is now prompt another question. Separate thing. How could exchanges stock order of those markets better support sustainable investors, right ? Probably one of the easiest things that stock exchange's khun do is tio encourage use ofthe standardized reporting frameworks, aunt, to help with this issue around consistency. And i think we even have a problem now have too much data to be analyzing as well. But that's something that regulation is always driven, a regional levels and that's, something that stock exchanges can help with. I'm afraid we are out of time. We have to leave it there. Thank you very much. Indeed, field questions. A big thank you to my panel here and to all of you for watching from all of us here. Goodbye for now.