Ethical Investing: Once you’ve bought, you can’t just sit back
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This week’s instalment in Stockhead’s Ethical Investing series explores what can be done once you’ve bought into a company.
Impact investing is a step beyond ethical investing and it is specifically investing to have a positive impact. But what can you do once you’ve bought and sold?
When Stockhead spoke with ethical financial advisor Stuart Barry about whether or not mining could be an ethical investment, he noted impact investing was “the last cab off the rank” – but was rising.
He said there was a “very, very large retail appetite” for impact investing. But the step from ethical to impact investing was a larger step than from not being unethical to being ethical.
For this week, Stockhead spoke with Regnan head of advisory Susheela Peres da Costa. While many firms adopted ESG as a concern years after foundation, this was why Regnan was born.
Its website boasts that it engages with companies to drive improved ESG governance and long term thinking needed for stocks to yield higher quality returns.
Recently it released its annual engagement report where it noted it engaged with 54 companies in the last year.
It is easy to think of lobbying or even GetUp-style advocacy. But da Costa said Regnan did things differently.
“The way we operate is to have a private conservation with executives to discuss ESG-regulated issues,” she said. “So they have the right combination of board skills or have they been organising ways in which their business units are expressing conditions.”
“Most of our ‘engagements’ is simple conversations. We have the advantage because we represent investors; it’s not an adversarial conversation.
“They know the clients we represent have their long-term interests at heart. We have a pretty clear idea of what we want to see changed in order to be able to be reassured they are well managed and its easy to assess because they disclose it.”
Regnan began 13 years ago and da Costa noted things had changed in that time. She noted that some things Regnan advocated then – such as directors trading reporting – were now the law.
But more importantly companies were coming to them more often than them going to the companies. Furthermore, even when Regnan initiated the conversation, the companies were quicker to engage.
“A lot of senior people in the companies see it as the proper way – responsibly focusing not only on their personal legacy but what the company is doing beyond just its profit,” she said.
While Regnan has undoubtedly made many impacts at specific companies, da Costa declined to give specific examples. Part of the reason was because it is not looking to embarrass companies, it wants to achieve change and it was done through private conversations.
She did share that Regnan’s clients were exclusively institutional.
“We’re talking about senior people who want this service done.”
She also stressed financials were not being neglected.
“Our version is not so much to focus on the ethics of business but how it might translate into good or bad business results, because that’s what investors also want.
“Often we’re talking about intangible things such as reputation and favour with the regulators – lots of things that can be a problem for business if they don’t watch them.”