Fiona Reynolds, CEO of Conexus Financial and former CEO of the Principles for Responsible Investment (PRI) joined AIM as a senior advisor late last year. During a recent visit to our London office, we sat down with her and had an engaging conversation around the development, challenges and area of focus she foresees for responsible investing, as well as her return to Australia.
1. What first piqued your interest in responsible investing many years back?
I started in the superannuation industry in Australia in the mid-1990s. The Superannuation Guarantee came into force in Australia in 1992, and so it was a new and exciting area. This was the first time that everyday workers had money put away for their retirement.
As the pot of money started to grow, it was clear there were lots of opportunities for finance to do good, to fund good projects, nation-building projects, and to use the influence of that money, as it kept growing with the growth of the superannuation system, to improve the quality of life for the people whose money it was.
I am a strong believer that people, profit and the planet all have to be balanced and in superannuation schemes was a fantastic pot of money which could be put to good use. It is money, at the end of the day, that makes the world go round.
2. Since your early involvement in responsible investing, where do you believe the biggest areas of progress has been made and what are the biggest challenges ahead?
When I first started working in this space, and talked to people about incorporating ESG factors into the management of portfolios, they looked at me like I had five heads. In their minds, incorporating ESG was all about giving up returns. This was not what their fiduciary duty was about.
One of the biggest areas of progress, albeit slow, is therefore the acceptance that incorporating ESG factors is not about giving up returns. It is a different way of thinking about investing: investing in better companies over the longer term.
Next to this, one of the biggest areas of change we have seen is that investors are really starting to understand the urgency of the transition to a low-carbon economy. Investors are now becoming involved in policy discussions.
In terms of challenges ahead, one of the biggest is that the list of ESG issues does not get shorter, it just gets longer. There are so many issues to deal with, how do investors prioritise? That is difficult. Alongside this, how do you, as investors, show the impact you are having, how do you show you are having an impact.
3. For asset owners, where do you think the key focus should be in the next couple of years to really make progress and an impact?
Asset owners really have to incorporate responsible investment into their overall strategy. There is no use just putting a small bit of money into a ‘responsible investment’ labelled product. It must be core to what you do.
Therefore, sustainability must come from the top – in strategy and investment beliefs – which is then pushed down into everything they do.
Asset owners must also understand the strategy of the managers they deal with. Where asset owners outsource the management of their money, they must ensure it is to those managers who have good teams of people, who understand the space and have the necessary skills and expertise. In tandem, asset owners must also scale up their own resources in their responsible investment teams.
There must also be increased focus on the climate transition. All areas of impact are of course important, both social and climate issues. But we can see from the latest IPCC report that keeping the world to 1.5 degrees seems like a pipe dream. There is an urgency which we need to focus on as investors, and the private sector has a huge role to play. While policy is important, the transition to a low carbon world has to be financed, and therein lies the role of the private sector.
4. How beneficial will the harmonisation of impact reporting standards be in progressing responsible investing?
There is a big mind shift going on at the moment, moving away from ESG integration to investing with a real world impact. But what investors are after, is really the data, frameworks and standards that help you to measure and report on that impact. There is still a lot of development that needs to be done. AIM is out in front here, having undertaken impact reporting in-house for a long time.
In harmonising impact reporting standards, it is important to avoid simple box-ticking but equally standards need to be put in place to avoid greenwashing.
5. How is life back in Australia since you have relocated a couple of months ago from London? What had you missed most?
I am loving life back in Australia, more than I thought I might. I thought it might be difficult making the transition back, but it hasn’t been.
What I miss most is my London – and European-based friends and colleagues. Europe is far more progressive on responsible investment issues than Australia, but therein also lies an opportunity. I have lots of experience in the space and to use this to progress the discussion in Australia is what I am trying to do.