In a world where every asset management firm is trying ways to show their ESG credentials, be it anniversaries of time involved in responsible investing, to letters to CEOs about their ethical endeavours, KBI Global Investors has a fairly simple strategy. It shows the impact of the firm’s respective funds on the UN’s Sustainable Development Goals.
“My role is to oversee the methodology of the RASS funds. It gives us the opportunity to go back to the investee companies with questions about the revenues [and their impact in RASS] and explain why they’ve scored how they have. It’s a great opportunity to engage with companies,” Eoin Fahy (pictured), head of responsible investing at KBI Global Investors told Fundeye.
To recap, two years ago the Dublin-based manager announced it had quantified the revenue impact of constituent portfolio holdings in each of its Natural Resources strategies to the SDGs and published the findings of its inaugural ‘Revenue Alignment SDG Score (RASS)’ research study.
In an investment climate where ESG is now central to many asset owners mandates, accusations of ‘greenwashing’ or extolling the responsible investing virtues of portfolios that aren’t in fact present has become an accusation that asset managers are right to be wary of.
Swedish pension fund AP7, with over €30 billion in assets under management, launched a search for a firm to provide impact investment in water. KBI Global Investors was one of two firms to win the mandate, not bad going for what is technically a boutique firm.
The semantics around ESG is a topic in itself. Mr Fahy said that impact investing is still relatively small compared to the broader ESG landscape and while some have defined impact by stating ‘if it were not for my investment, the company’s goals couldn’t be achieved’, this is a bit of an over simplification for Mr Fahy.
“The problem is can I really say that if I don’t invest in this company will the goals not be achieved anyway? Some other company may invest instead,” he said.
His definition may sound equally simple but then again often the simplest things make sense. “We say that investing in something that is aiming to achieve a decent outcome must be a good thing,” he stated.
The firm’s recent release of this year’s RASS scores gave its Water strategy a score of 72 percent, which is the percentage of revenues directly in support of the UN SDG’s regarding water. One of the draws for investors seeking a decent impact product is that the scores aren’t given by the investee companies, they’re worked out by KBI Global Investors based on the revenues of the companies (which are obviously supplied by the investee holdings). “You couldn’t really do this if you were invested in a thousand different stocks as we have to analyse the data ourselves,” .said Mr Fahy, although now the system is in place the yearly RASS scores are easy to produce
“Transparency makes sense and costs us very little. We think transparency is in our interest, the company’s interest and the investor’s interest,” said Mr Fahy. This transparency is evident with a look at the firm’s website. There you’ll find interesting stats such as stocks the company won’t invest in and why, how the firm has voted at investee companies’ AGMs and why (including why it has voted against management) along with various other information.
Looking at where the impetus for impact investing is coming from, as displayed by AP7, Scandinavia leads the way according to Mr Fahy. He went to state that the region is generally a couple of years ahead of the rest of the world but even the US, sometimes regarded as a tad reluctant to embrace responsible investing, is showing interest in the firm’s products with foundations and some pension funds getting involved (mostly on the West/East coast).
In a post COVID-19 market, where the lockdown has highlighted issues such as pollution, firms have been launching ESG funds at a heightened pace. With the asset owners growing more informed about how responsible investing can be achieved, including a growing level of scepticism over ethical claims, KBI Global Investors may be well placed to capture inflows from an increasingly woke investor base.
