Jyske Capital & GES International – an ESG partnership
Responsible investments have become fairly mainstream – a general expectation of sound asset management practices. The number of investors looking for investments based on Principles for Responsible Investment (PRI) have increased in the past 10 years, and the implementation of tools in the area of responsible investments has become far more extensive and with greater depth. The global financial crisis in 2007/2008, which had ethics and responsibility among its key elements, has only reinforced this trend. In the same period, several guidelines have been issued which responsible investors must consider and which external stakeholders can use to hold investors accountable. In line with the increased focus on ESG (Environmental, Social and Governance factors) and increased transparency in this field, the market is also ‘pricing in’ these factors, and this may have an impact on returns on investments in the future.
Why collaborate on ESG?
It may be a complex and resource-intensive task for individual asset managers to cover thousands of companies on ESG factors, which typically requires in-depth research. Unlike with financial ratios, there are no clear formats for reporting and revision of ESG factors, and a far more qualitative analysis is therefore involved. For example from a cost perspective, it therefore makes really good sense for us to collaborate with specialised external partners as part of our management of responsible investments. One of our most important partners is GES International (GES), which is one of the world's leading firm of consultants in the field of responsible investments. GES facilitates our collaboration with other investors, which ensures a uniform and well-established approach. Especially in the engagement dialogue, we acquire greater influence when the dialogue is backed by many investors and thus a larger ownership share.
Development trends in responsible investment
The concept of ESG is under constant development – and the field is continuously being expanded with new guidelines and themes. The complexity and goalposts for what responsible investors must consider keep changing. Our external partnerships with GES and other companies help keep us up to date on new trends and also help us handle the new opportunities and challenges – for example the trend towards active ownership and the new OECD guidelines.
Many investors use screening to monitor controversial factors in portfolios or investment universes. A steadily increasing number of investors choose to take active ownership of problems caught in the screening process or of companies where they see a higher risk. Active ownership entails that investors, through their dialogue with the companies, acquire greater insight into and more updated information about the companies and thus the possibility of influencing them in a positive direction.
The new OECD guidelines – Guidelines for Institutional Investors – consolidate the trend towards investors increasingly being expected to develop a more pro-active approach to ESG. Many investors have a primarily reactive approach in which they have a well-established system for reacting to controversial issues – i.e. where an incident has already occurred. Under the new guidelines, investors must analyse risks and act on the basis of this risk analysis, including through engagement with the companies. Investors must preferably prioritise their engagement initiatives and should single out the investments in which the greatest risks are identifiable.
Read about our investment strategies with focus on responsible investment here.