RI Australia 2021 is the annual conference of the Responsible Investment Association of Australasia (aka RIAA) and this year they introduced a covid-safe, hybrid conference that offered both an in-person and a digital experience.
I watched and listened from my office, and while I soaked in the wisdom of the speakers, I did miss being there. I missed the spontaneity of meeting new people, and the opportunity to put a face to a LinkedIn profile. Especially after being isolated for so much of last year.
For those who did attend, please do offer some comments below the article, or on social media, and let us know your experience of being back out in the wild; albeit behind a mask.
I was able to dip into most of the sessions for the day, some for longer than others, and I was naturally drawn to those with an ‘impact’ angle. Kylie Charlton, managing director of Australian Impact Investments, moderated a session that asked; How can we enable more people to engage with impact investment, and, are we even ready?
Impact and advice: are we ready to democratise impact?
Kylie began proceedings by explaining that not a day goes by that she isn’t asked by a retail investor for guidance on how they can get involved in impact investing. Unfortunately she has to tell them, sorry there’s nothing available.
So she asked her panel, is there a middle way?
“I hate to say this, being a purist, but is there an investment option that goes beyond the concept of avoiding harm, which is what most retail investors have been able to access, and take them further along the impact spectrum, from avoiding harm to benefit, and then through to contributing to solutions? With strategies that have characteristics of an impact investment, of intentionality measurability social, environmental outcomes and financial returns all together?” she asked.
This became the theme of the session, discussed by her panelists:
Farren Williams – Advisor and Partner at Koda Capital
Susheela Peres da Costa – RIAA Chair, and Head of Advisory at Regnan
Vinnie Wadhera – Executive Director Institutional & Adviser BetaShares
Challenges
Farren Williams got the ball rolling, explaining the factors that she felt were holding-back impact investment from broader adoption.
“Liquidity is a major issue, in terms of infusing impact across asset classes within the portfolio, but also, in maintaining the overall liquidity that they need in the portfolio. There are often trade-offs. So sometimes that will provide a natural cap on the amount that could be allocated. But we’re seeing more and more that there are more liquid options and secondary markets are better functioning.”
“Also, we’re still not at a point where a client can say; these are my specific areas of passion, I really want to move the dial on, and then be able to design a portfolio that is absolutely aligned to those, and nothing else. So I think you can find investments often that marry up with those particular passions, but it doesn’t necessarily mean that you can do it from a diversified portfolio, just with those thematics.”
Accessibility
Vinnie Wadhera, from Betashares, works in public markets, so his perspective focussed on the levers that equities investors do have, in terms of engagement, to try and influence companies. In the wider choice that is now available to invest in such a wide array of ETF’s, as well as the democratisation that comes from having low-cost access to diversified funds.
“We believe ETFs certainly do provide accessibility, there’s less friction to invest, and that’s democratising investing.” Vinnie said.
“Companies are now reporting on their emissions and there’s a whole lot of listed companies, the companies themselves like the ones listed out here are big companies in terms of market cap traded volumes too. And that now means that data index providers can wrap up those companies in index funds, and that makes them available. These are the companies in our recently launched Earth Fund, our climate innovation fund. It puts it into perspective, this is what an investor can do by investing in this space, with companies that are involved in their everyday lives.”
“So as a passive manager we can still engage with proxy voting, we can still proactively engage with engagement with companies on key issues, and with some $205 billion of assets across 8 ETFs in the space, we’ve got some power to democratise the space.” Vinnie said.
Are we ready?
Susheela Peres da Costa was asked what other avenues exist to have impact, that may not necessarily be thought of traditionally in that way. And she asked, ‘but are we ready?’
“We can do this. This is the good news, I think the question for the panel is, are we ready to democratise impact? We absolutely can do this, but we’re going to have to let go of some shibboleths in responsible investing.”
“They can come both from the impact side and also from the traditional ethical investing side. One of the things that we’re probably going to need to let go of is the idea that this can be done easily through a focus on industries and thresholds, things that have long been used in screening to identify what kinds of companies should be classified as having a good versus a bad impact. Those are shortcuts that have worked for us for a really long time, but don’t necessarily get to the heart of what creates impact in the world and what hinders positive impact in the world. So, as an example here, when we’re thinking about what companies to avoid, we’re thinking about, are we doing this for risk-return reasons? Are we using these products simply because they can be used, that they happen to have a particular code or a UN convention?”
“Are we using just pragmatic proxies for what we think this is about, like carbon foot-printing. When actually, we should consider that the company that happens to be the biggest emitter in Australia is not necessarily the one that is profiting the most from fossil fuels. If we actually want to look at culpability we want to think about who’s doing the best work, and we want to support that work and that’s the impact story. The flip-side, being the screening story.”
“This is about culpability, it’s not about industry, and arguably tiny coal players in their last couple of years of production, before the mine’s natural end-of-life are likely doing less harm, and the hypothetical international video company, that’s selling climate denial across many jurisdictions of the world are in fact hindering global carbon regulation.”
“That’s where we need to be focused. To ask, what is the cause, and what are the impact problems, and what are the impact solutions?”