Total Time: 6:39

Sage Advisory: Hello, we're here at the Sage Perspectives on the Future Conference 2019. And we're here with Chris Fowle, who is Director of the Americas for PRI, Principles for Responsible Investment. Welcome, Chris.

Chris Fowle: Thank you. Great to be here.

Sage Advisory: Chris, perhaps you can tell us what PRI is and what it what it does to start off?

0:20

Chris Fowle: Sure. Happy to. So we're a global membership organization headquartered in London. We were founded in 2006, essentially, as a spinoff from the United Nations. So they supported us in our development. We are a membership organization that asks our members to commit to a set of six principles all related to responsible investment and how to integrate responsible investment into investment processes.

Sage Advisory: Excellent. And at a high level, what is responsible investing?

0:48

Chris Fowle: Sure, so investment that takes into account material risks and opportunities related to environmental, social and governance issues. From the PRI’s perspective, our mission is to contribute to the development of a sustainable financial system, and that's supported by the strong belief that material risks and opportunities within the ESG space can influence not only valuations, but also the financial system as a whole.

Sage Advisory: So the interest in ESG is clearly growing very rapidly. I'm curious as to what you attribute this to and whether you think this is in itself sustainable or whether it's a passing phase.

1:29

Chris Fowle: I would definitely say it's here to stay. I think as people start to understand what we mean by ESG integration and responsible investment, that it's actually value investing and not solely values-based investing, meaning you're not just reducing an investable universe and potentially giving up returns – that you'll see even larger-scale adoption of ESG practices. And so driving that I would say is fundamentally demand. Investment professionals have an understanding because their clients are asking. Asset owners in particular are an important segment for us, as the ultimate decision-makers, so demand from asset owners. But also on the retail side, the millennials have a much stronger interest in these issues and how their actions and their investment dollars can have an impact on their society and their environment, I think has a very strong influence on where this is going. And then finally, I'd say regulation. In many markets, there is a strong response to ESG issues and the importance of taking them into account both at national and sub-national levels. We've seen some of that in the United States, but I would say that in other countries, the trend is much, much stronger, and there are more sort of coherent approaches to regulating approaches to ESG than then we've seen so far in the U.S.

Sage Advisory: About two years ago, I believe your organization and the CFA Institute carried out a major survey on integrating ESG factors into portfolios. Can you tell us a little bit more about the survey itself and the findings from that?

3:11

Chris Fowle: Sure. I mean, we're always getting a question of, how do I do ESG? And we wanted to find a practical way to help our Signatories in the broader investment community get started. And so the CFA Institute, of course, a premier organization with a lot of credibility, they were eager to partner with us. And so what we did is we undertook a global survey and in series of interviews to understand what ESG actually looks like at that point in time, starting in 2017. And so we ended up serving more than 1,000 practitioners, most of whom were CFAs, across many countries, I think it was 17 major markets and 23 workshops that we did. And we got a lot of great input, and we came up with an ESG integration framework.

Sage Advisory: This framework – is that like best practices? Would that be another way of putting it?

4:06

Chris Fowle: So I wouldn't say that it's the only way to do ESG integration, but I think it does incorporate the fundamental pieces, some of which a particular organization may want to choose to focus on where to utilize as they begin their ESG journey. And so a little more concretely, we look at sort of the research that supports ESG-related decisions. We look at security-level analysis, and we look at portfolio-level analysis, all with the traditional investment processes around risk management, asset allocation and strategy that any good investment process would utilize.

Sage Advisory: So the PRI helps to standardize the view on ESG? Would that be fair?

4:56

Chris Fowle: Yeah, I think PRI as part of being a Signatory, we actually have a reporting process. So we ask questions on an annual basis around what you're doing on ESG themes and by asset class, etc. And so ultimately, yeah, we've been characterized as the gold standard of ESG. And a way to understand where you are on your journey and how to improve over time, and we often partner with leading organizations like the CFA Institute to enhance our approach to responsible investment.

Sage Advisory: Given the wealth of information that you have and the range of prestigious Signatories that I'm sure are at the PRI, you have a great view on the industry. What do you see coming up in the year or two ahead? Are there any major changes taking expected to take place?

5:44

Chris Fowle: Probably in that context I would mention climate. [Climate] is the No. 1 issue area for our Signatories globally, and there's been a lot happening in the last several years with regard to climate. I would point out the TCFD. It's an acronym that stands for the Task Force on Climate-Related Financial Disclosures. The requirement now is that PRI Signatories have to answer questions related to their approach to climate, in-line with the TCFD recommendations. I think that's an important trend because Signatories that perhaps were kind of wanting to stay, call it mid-pack or back-of pack in terms of starting to address climate are now going to be taking a step forward perhaps faster than they anticipated to look at these issues, understand the risks and opportunities, and get a handle on how there may be potential portfolio impacts for them going forward.

Sage Advisory: Well, thank you, Chris, for your time. Very much appreciate it and the presentation today.

Chris Fowle: Thank you. My pleasure. Thank you.