A message from Schroders' Group Chief Executive Peter Harrison:

"Views on sustainability will differ, but our teams are not afraid to ask the difficult questions necessary to help our clients reach their goals."

Against a backdrop of rising inflation rates, the Ukraine war and some anti-ESG rhetoric, our investment specialists have been tackling difficult sustainability issues with thousands of companies across 73 countries over the past year.

A continued commitment to active ownership as a sustainable investment strategy is at the heart of this. We recognise the wisdom of having those closest to the holdings – fund managers and analysts – leading on engagement. This is happening: one fifth of sustainability-focused engagements with holdings were investor-led in 2022. That’s 1,112 of 5,300 in total that were driven by investment desks – up from 345 in 2021, an increase of 222%.

The numbers also illustrate the importance of the sustainable investment team – around 50 ESG and impact specialists – to a much bigger company-wide effort. This team also provides the connectivity across investment desks. It works closely with fund managers to analyse global risks and opportunities, to use our influence to encourage companies to change and to help channel capital into innovative new solutions around the world.

It’s not a siloed team, and the culture across our business is one of constant curiosity.

Since publishing our first Engagement Blueprint, which lays out our priorities and expectations of companies across six thematic areas, in early 2022, we have continued to make progress on a number of fronts.

The climate crisis epitomises why investor questioning is so important and finding answers is not easy.  

One year into Russia’s invasion of Ukraine, which has disrupted the global supply of energy, power cuts have been avoided in Europe so far.

But the energy crisis is not over, and the International Energy Agency’s Coal Market Report shows some nations, such as India and Indonesia, have resorted to burning more coal.

Meanwhile Bangladesh, Pakistan and Sri Lanka have faced power outages due to fuel shortages in the past 12 months.

Here in the UK it has been reported old coal-fired power plants started generating again amid a cold snap.

Whether through new insights, influence or innovation, against this challenging backdrop it is more important than ever to invest in finding answers to the complex problem of climate change.

And it is not just about finding ways of transitioning to net zero and tackling the growing threat, it is – importantly – a question of maximising the potential benefits for investors.

Sustainable Investment Report 2022