The industry should focus on how funds are working towards a sustainable future rather than trying to achieve green purity, according to Henrik Pontzen, head of ESG at Union Investment.
Pontzen made the comment during the ‘Implementing ESG principles in practice to develop investment fund products’ panel at the ALFI European Asset Management conference in Luxembourg.
He expanded on his point with the observation that the two major regulatory targets currently seen in the industry are “not going in the same direction”; fervent attempts to stop greenwashing are hampering the ability of companies to effectively allocate capital towards a sustainable future.
A second panellist agreed that the main aim of sustainable investments is to bring in money to solve a problem. There needs to be an “approach based on principles,” they argued, rather than specific indicators that limit funds’ and firms’ development.
Currently, sustainable investments focus on the 2 per cent of very green funds, Pontzen reported. Other sectors are excluded due to their lack of immediate green credentials, with the potential for transformation ignored. Pontzen emphasised the importance of firms asking: “where’s the better half of this sector and how can we invest in it?” This will allow for real change beyond an idealised vision.
Continuing the ESG discussion, one panellist raised the “increasingly important theme” of biodiversity in the industry. While countries may be taking action against the rapid loss of species, many sectors remain irresponsible in their operations to keep profits high, they reported.
However, with nature playing a vital role in global GDPs, it is essential that companies put targets and frameworks in place to reduce their impacts. This includes assessments of risk exposure to biodiversity and nature loss, the panellist stated, and the appropriate allocation of funds in response to these assessments.
They went on to affirm that although the localised nature of biodiversity data can make it difficult to measure, methods such as ‘mean species abundance’ can be used to create more comparable metrics. Data is no longer an excuse to not talk about biodiversity, he assured.
Additionally, the work of collaborative groups such as Campaign for Nature’s 30x30 initiative and the Nature Action 100 initiative are important programmes that can help to improve the industry’s biodiversity impact, the speaker said.
Looking to the future, they predicted that biodiversity impacts will continue to become a more prevalent investment theme, and will be considered alongside ESG impacts over the next decade.
Pontzen reinforced the importance of environmental sustainability in the industry and the urgency with which it needs to be addressed with the fact that every 10 minutes, a species disappears. On average, two species would have disappeared by the end of the panel, he added — this is an issue that the industry must work together to tackle.
