Sustainable Investment Report Q4 2020: Looking ahead from a transformative year

Against the unusual backdrop of a global pandemic, this year we achieved our target of integrating environmental, social and governance (ESG) issues into our financial analysis. We expect 2021 to be another record year for inflows into sustainable investment funds. As more people seek investments with purpose, our ability to measure and report on impact is crucial.

ESG integration has been a key focus at Schroders in recent years. In 2019 we publicly committed to ensuring ESG factors were appropriately integrated into investment decisions across the assets we manage.

We achieved our target this quarter, driven by a rigorous internal accreditation process originally launched in 2017. Now it is applied to each investment desk. 

The events of this year have shown just how important it is that sustainability considerations are not just a tick-box exercise.

At Schroders, as an active manager, sustainability is an integral part of how we invest – read more from Stephanie Chang, Schroders’ Head of Integration, on page 4 of the report.

We’ve also been busy this year developing a new impact reporting framework. Using proprietary ESG tools, we will soon be helping investors understand more about the impact their portfolios have on people and the planet.

On the path to net zero

It had been said that 2020 would be a critical year for addressing climate change, arguably one of the most pressing long-term issues we face.

With the COP26 climate summit now taking place towards the end of 2021, we expect a greater focus on climate risk over the course of this year.

New US president Joe Biden’s U-turn on climate policy could inspire action, as Schroders’ Global Head of Sustainable Investment Andy Howard explains on page 7.

Schroders has joined the Net Zero Asset Managers initiative, supporting the goal of net zero greenhouse gas emissions by 2050 or sooner. You can expect more on how we will encourage the transition.

The exponential growth of sustainability policy 

There has been a range of government action around the world. While the majority of policy has been favourable for ESG, the backdrop in the United States has been at odds with the rest of the world when it comes to a new pensions ruling. Sarah Bratton Hughes, Head of Sustainability in North America, writes on this on page 11.

Meanwhile 2021 marks an important year for financial institutions in the EU as sustainability-related disclosures regulation comes into force. This is part of the European Commission’s broader Sustainable Finance Action Plan to support a transition to a greener future.

Regulators in Hong Kong and Singapore are also looking into how environmental risks can be brought into the picture, and in Australia the regulator of pension funds and insurers already requires them to consider ESG risks. 

Active ownership in practice

At Schroders we believe we have certain responsibilities as investors and as guardians of our clients’ assets. We seek to actively influence corporate behaviour to ensure the companies we invest in are managed in a sustainable way.

The active ownership section of our report captures our voting and engagements from the fourth quarter. From summary stats to in-depth case studies, this section provides transparency over how we are using our influence to drive change.

You can read more about how we’re engaging with Russian businesses over thawing permafrost (page 16), our ask of Tesco on executive pay (page 20), and how we’re tackling the treatment of migrant workers in Singapore (page 18).

Schroders’ chief executive Peter Harrison wrote in the foreword to our 2019 report that “after a challenging 2018 for markets, I can assure you that our commitment to sustainability as a firm and as an investor remains undimmed”.

Despite headwinds, Schroders can demonstrate that pledge has been kept.

You can access the full report here.