Funds Europe – If a fund domicile wishes to position itself as a ‘green hub’ or ‘sustainable centre of excellence’ (which is the case in Ireland), what are the steps that need to be taken?
Creswell – I was quite interested in this idea of a green hub. I think Ireland – which is the Emerald Isle, after all – can really set itself apart by taking leadership on definitions, categorisation, and acceptable processes within ESG.
One of the things that we’re having to invest in is engagement, and we think engagement is an absolutely key function of ESG. What we think is very risky is if national regulators start to denominate asset classes as anti-ESG, so you can’t invest in carbon because it’s anti-ESG, you can’t invest in armaments because it’s anti-ESG.
I sit on the board of an ecclesiastical endowment, and there are two things that came up for us: number one is we are located in the heart of the UK military headquarters, so thousands of jobs depend on armaments development, so even though we’re an ecclesiastical endowment we’re saying, ‘We don’t want to deprive people of their jobs.
Secondly, in the last few weeks we’ve had proof that we need an armaments industry for defence, this idea of defence has been forgotten; that’s why we make armaments.
On the carbon side, we can’t transition to a carbon-free environment without the revenues from carbon, so as an investor these companies have a key role to play for all kinds of reasons including experience of large infrastructure projects which could be utilised for renewable energy, and we don’t want our institutional clients being prevented from investing because they’ve got an ESG label against them.
What we want is clear rules of engagement around how we determine a bad actor. We want that to remain with our judgement, which we determine through engagement. Also, just developing acceptable processes, acceptable definitions, accrediting benchmarks that are acceptable ESG benchmarks, and developing some common ground in the Irish structure.
In summary, the capital markets are there for funds like us to invest in and direct money to the future and what we need is understanding around ESG that will allow us to efficiently allocate capital to deliver the social requirement, the social needs rather than something that’s maybe more prescriptive. Prescriptive solutions tend to end up with bad allocations of capital.
Prew – The whole funds industry ecosystem needs to think about their own ESG credentials and there will be a lot more focus on service provider ESG within the asset management supply chain. Indos and our parent JTC Group have also become carbon-neutral, which is just one thing that managers and other service providers can do to enhance their ESG profile. If fund managers and service providers continue to proactively embrace ESG, then Ireland will continue to be an attractive destination to partner with effectively.
McEvoy – Talent is essential for any business ecosystem. We’re fortunate, we have it here in spades, and I think the Irish academic institutions have always been very good at being able to pivot and develop. This is certainly an area where it’s very important that graduates are coming through with good knowledge and understanding on ESG and responsible investing in the sector, so firms like ourselves are able to embrace them into the industry and help grow that ecosystem.
Fox – I joke that Ireland should be entitled to have some ownership of the colour green, given the close association with our national identity. But, as we can’t copyright the colour, we’ll have to settle for soft ownership of it for now!
In Ireland, we have strongly committed support from the government for sustainable finance and last year we published the first National Sustainable Finance Road Map outlining the ambition we have in this area. The Road Map includes some 18 different action plans across four distinct pillars and the important point is that it is a joint plan, between industry, government, and the regulator.
Training and access to talent is also hugely important. Through the government-funded sustainable finance Skillnet, Ireland is looking at national training and leadership capacity in sustainable finance and ESG. In 2020, for example, Ireland rolled out the development of what we think is Europe’s first Taxonomy training programme for asset managers. Sustainable finance has been one of the key priorities of Irish Funds over the last number of years and we have produced a significant number of technical information notes and webinars alongside continuous engagement with national and European regulators.