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2022 resolutions and predictions part 2: Food waste, jargon and UK leadership

The second instalment of ESG Clarity Committee members sharing their personal New Year's resolutions and 2022 predictions

Finally resolving the jargon and naming issues

Gemma Woodward, director of responsible investment, Quilter Cheviot

What is your sustainable New Year’s resolution for 2022?

With COP26 in 2021, there was renewed focus on how each and every one of us has responsibility for our consumption choices. Every little really does help, so my New Year’s resolution for 2022 is to continue to find reusable products to replace single-use products. It is a tried and tested way of being more sustainable. Thankfully, as more and more people realise the impact of their own consumption decision on the climate, there are more products coming to the market to reduce dependency on single-use products.

What is your key prediction for the responsible investment industry for the year ahead?

It may be a rather hopeful predication, but I predict that 2022 is the year we finally resolve the jargon and naming issues so that consumers are really clear about what characteristics funds and investment products have. I hope we stop using the term ‘ESG funds’, which is a horrible catch-all and doesn’t differentiate between different approaches. This should be assisted by some pretty major pieces of regulatory change, including the FCA’s proposals for a new sustainable investment labelling regime, as well as the government’s ongoing efforts to introduce a green taxonomy, which will set the bar for investments that can be considered environmentally sustainable.  Hopefully, 2022 will be the year we are all singing from the same hymn sheet.

Greater transparency and accountability

Bev Shah, CEO, City Hive

What’s your sustainability New Year’s resolution?

During 2021 I moved to purchasing exact quantities of ingredients, using my own reusable packaging if possible, instead of buying pre-packaged.  I noticed a significant drop in the amount of unused food we were wasting in our household.  In 2022, I will be continuing on the mission to eat more sustainably by cutting down the amount of meat we eat in our household. These are measures that will also shape my children’s long term sustainable habits as they grow into adults.

What’s your big prediction for next year in the ESG space?

Last year, I predicted that investors would demand measurable metrics to distinguish between those who are really practising sustainable investing versus those who are greenwashing. With COP26 elevating the investment industries responsibilities in, this trend of greater transparency and accountability will continue into 2022 with more scrutiny of the actual metrics being relied on to measure impact and action with focus growing on the ‘S’.

UK leadership on nature and biodiversity

James alexander, chief executive, UKSIF

What is your key prediction for the responsible investment industry for the year ahead?

We anticipate 2022 will be the year where ESG is further recognised as far broader than climate change, as we consider more actively the range of impacts that finance and business activities have on the wider community and the world around us, and as part of a wider recognition of the diverse range of planetary boundaries we’re in danger of breaching. In particular, we hope to see the UK drive forward its global leadership on nature and biodiversity during its continued Presidency of COP26 ahead of COP27 later this year and ahead of the COP15 on biodiversity in China.

 

2021 saw sustainable finance charging ahead, spurred on by a far more engaged industry, consumer demand, COP26 and active policymaking from governments. We expect 2022 will be another huge year for the growth of sustainable finance and UKSIF will be at the heart of the action, driving us towards the sustainable future we all want to see. 

Reducing food waste and SFDR

Diane Earnshaw, head of research and consulting, Square Mile Investment Consulting and Research

What is your sustainable New Year’s resolution for 2022?

I have quite a few New Year’s resolutions. Personally, I’d like to focus on being more healthy. I plan to walk, cycle and run more so I am using my car less. I’m pretty good on the diet front in terms of what we eat as a family but there are times we could improve on food waste, so we will be using up all our leftovers this year. I made a good start at Christmas as we lived on turkey recipes for a week!

Work wise, there are lots of exciting plans at Square Mile for 2022. We will be expanding our research net even further in the hunt for great responsible investment funds for our clients. I will also be working closely with our 3D analyst team as we continue to evolve our 3D holdings and fund analysis capability. The responsible investment industry is growing at pace so it’s going to be a busy and exciting year. 

What is your key prediction for the responsible investment industry for the year ahead?

We will continue to see growing demand from clients who want funds that can meet both financial and responsible investment objectives.

SFDR is already having a significant impact on European domiciled funds and on product development and the number of funds reporting as article 8 and 9. With the FCA’s recent publication of their discussion paper DP21/4 Sustainability Disclosure Requirements (SDR) and investment labels, regulation in the UK will become an important theme. Regulation will also be a push factor in demand for responsible investment funds, forcing change and there is an expectation from the regulator that advisers will make the identification of a client’s sustainability preferences a more pronounced feature in the suitability process.

‘We could see major financial shock triggered by extreme weather’

Julia Dreblow, director of SRI services & founder at Fund EcoMarket

What is your sustainable New Year’s resolution for 2022?

This is tough.  I’d like to cut our red meat consumption to zero – and commit to never flying again – but that would be no more realistic than giving up gin or chocolate.

I have worked in sustainable investment for nearly 30 years and of course we are lucky in the overall scheme of things.  We have had solar panels for 12 years, bought a little electric Renault last year, use Ecover for everything and still buy from the Body Shop.  Thanks to my husband’s research, we recently switched to feeding our (poor?!) dogs mostly on Bugbakes, buying Oddbox veg and Who Gives a Crap toilet paper (the name may have played a part!).  Yet I know this is not good enough, even alongside recycling etc.

So what next?  I always encourage people to focus on their day jobs as business is where most harm – and good – originate.  Maybe it is time for me to work on framing sustainability as the greatest investment opportunity of our time – which I believe it is. Perhaps examples like the above might be a reasonable start?

What is your key prediction for the responsible investment industry for the year ahead?

I would not rule out the possibility of a major financial shock triggered by extreme weather – and the sudden realisation that we need to act immediately to avert the collapse of the natural systems we rely on. However, I am rather hoping that regulation and raising standards will be the biggest RI news in 2022.

There’s lots happening, but in my corner, it will be mostly about DP21/4, the FCA’s Sustainability Disclosure Requirements and investment labels’ discussion paper will soon morph into a consultation, and hopefully, once the bumps are ironed out, become regulation. It won’t be easy as everyone has an opinion, but if we don’t raise standards and improve client understanding (and trust) the sustainable investment ‘market’ could be in real trouble.

Recent expansion, although welcome, has been largely driven (if not ‘led’) by recent converts. Although generally well-intentioned and travelling in the right direction they are all too often in the wrong gear and apparently lacking a map.  It is time for that to change.

Building partnerships and fund labelling

Rebecca Kowalski, company director at Overstory Finance

What is your sustainable New Year’s resolution for 2022?

I made some big moves in 2021 to reduce my personal carbon footprint and increase my positive impact – moving to a local employer to walk to the office and setting up a consultancy business to encourage and support financial advisers with sustainable investing.

For 2022, I will be seeking to ratchet up that impact by working efficiently with as many advice businesses as possible.  I believe its key to open up a national debate about planetary boundaries: in classrooms, offices, the pub, the supermarket and the financial planning meeting. I’m aiming for a cascade effect – I enthuse and empower the IFA, they pass the message on to hundreds of clients, who proceed to tell family and friends positive and pressing stories about where their money is flowing.

I’ve also started building some great partnerships who will help me extend my reach.

What is your key prediction for the responsible investment industry for the year ahead?

I expect to see a lot going on in 2022!  Some coming together but hopefully also some real innovation. The FCA consultation on disclosures and fund labels will eventually put the range of fund types on the sustainability spectrum into several clearly defined boxes.

Investment styles that were once put in a corner are becoming increasingly common and will be pursuing the same net-zero friendly companies. I hope this will act as a springboard for greater innovation and leadership in the name of differentiation. I listened to Guy Opperman, Pensions Minister, on a podcast recently. He was suggesting that pension scheme trustees align their resources and their aims to really scale up the type of impact projects they can get involved in.

In 2022, it could be not just the company you invest in, but also the company you keep that will really make waves.

 

‘Those faking it will be left behind’

Matt Orsagh, senior director of capital markets policy at CFA Institute

What is your sustainable New Year’s resolution for 2022?

My new year’s resolution is to read more ESG content. I already read a lot, but I’d like to keep on top of things more thoroughly. You would think that is an easy one in this line of work, but I’d like to be more disciplined about setting aside time to read to keep up. I read a lot of ESG stuff, but it never feels like enough. One of the most compelling things about the ESG world to me is that it is so broad, and there is so much to know that it is never boring and there is always something knew to learn – but that is the challenge. What it means to be an ESG specialist is changing every day.  ESG is one of the most dynamic areas of finance, but that means a lot of homework.

What is your key prediction for the responsible investment industry for the year ahead?

My prediction is that there will be a shakeout in funds that call themselves ESG or sustainable, but really are not ESG or sustainable funds. Investors are becoming more demanding of their ESG funds and with new transparency tools will demand that the financial products they purchase walk the walk as well as talk the talk. As investors gain more insight into what is a real sustainability fund and what is just a greenwashing fund, those that were faking it will be left behind.

 

Shunning fast fashion and combatting greenwashing

Annabel Brodie-Smith, communications Director at Association of Investment Companies

What is your sustainable New Year’s resolution for 2022?

My sustainable resolution for 2022 is to stop and think very hard before I buy any item of clothing. Do I need it? How many times will I use it? Could I hire it? I have a weakness for buying clothes and now will have to think long and hard before I buy something. I have never been a fan of fast fashion and will strive to buy good quality items and wear them forever. I’m also going to get clothes, shoes and bags mended and not throw them away or let them sit at the bottom of my wardrobe which is what happens now!

What is your key prediction for the responsible investment industry for the year ahead?

My prediction is that the FCA agrees rules on appropriate labelling for ESG funds this year. For too long many funds have branded themselves as sustainable without sufficient evidence to back up this claim. In 2021 the FCA’s Sustainability Disclosure Requirements and labelling discussion paper started the debate on the taxonomy and labelling of ESG funds in the UK.

It’s not often we argue that we should be included in regulation, but this is an exception as we think investment companies have got a lot to offer on ESG. We want investors to be able to compare us against open-ended funds on a level playing field, which means a common framework and standards. We also want the hurdles required for a fund to warrant a ‘sustainable’ label to be high enough to really combat greenwashing. The FCA expects to consult on the rules for ESG labelling in Q2 so there’s plenty of time for new rules to be announced in 2022.

Moving from talk to action

Leon Kamhi, head of responsibility at Federated Hermes

What is your sustainable New Year’s resolution for 2022?

By working with colleagues, investee companies, industry peers including competitors, policymakers and citizen groups, to make my own small contribution and provide the best return for the investors and society we all serve. A return which provides an income, a decent cost of living and a better society and environment in which to live.

What is your key prediction for the responsible investment industry for the year ahead?

I am going to be an optimist and say that 2022 will be the year the economy moves from talk to action. Regulators will – with clarity – require action from the investment industry that leads to positive change not greenwashing and where effective stewardship has at least as much importance as thematic investing. Policymakers will work with the private sector and incentivise the economy to embrace renewable technologies and a just transition. Investors will engage with their investees to ensure capital is allocated to sustainable solutions and fulfil their social licence to operate.

Increasing regulatory burden

Ashley Hamilton Claxton, head of responsible investment at Royal London Asset Management

What is your sustainable New Year’s resolution for 2022?

To read and reflect more on new trends and ideas in sustainability. Work on shifting out industry to more systems thinking and pivot work towards impact and outcomes (focusing less on business risk).

What is your key prediction for the responsible investment industry for the year ahead?

We will likely see more regulation and more investigations into ESG and greenwashing. The regulatory burden will increase, but unfortunately clients still won’t have much clarity – confusion over terminology, language and disclosure requirements will persist.

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...