Bruce Murphy

Examples of engagement with regulators and policymakers to seek to mitigate systemic risks facing the environment and society are outlined in Responsible Stewardship at Insight^[1], the annual Responsible Stewardship report from Insight Investment.

Insight is an A$1.2trn^[2] global asset and risk manager with 292 investment professionals^[3] which takes its responsibility to look after its client’s interests seriously. In doing so, it leverages its technical expertise and market presence to seek to influence policymakers for the benefit of clients and investors in general. Examples include responding to regulatory proposals encouraging greater transparency on environmental, social and governance (ESG) issues – details of consultation responses to the US Department of Labor and to the UK Financial Conduct Authority are outlined in the report. Insight also initiated its first wave of research into natural capital risk in corporate bonds, an area which currently lacks robust data that can be used to support investment decision-making.

The report gives further examples of work undertaken on behalf of clients to mitigate systemic risks such as climate change. In addition to a range of relevant case studies, Insight also shares key themes in its counterparty and thematic engagement programmes and outlines priorities for future enhancements to its approach to responsible investment. In 2021 Insight made further enhancements to its proprietary corporate ESG and climate risk ratings, and sovereign ESG framework, all of which directly support engagement efforts. More than 80% of Insight’s direct interactions with debt issuers in 2021 included some form of dialogue on one or more ESG topics. This activity relates to Insight’s mission to increase the certainty of investment outcomes for its clients, typically institutions with long-term funding requirements.

ESG risk assessment and engagement with counterparties is a long-standing part of Insight’s credit research process. Financial institutions such as banks play a particularly important role in driving change and are significant constituents of bond indices. Insight’s scale in liability driven investment, of which derivative management is a significant factor, means that it maintains relationships with a broad range of bank counterparties.  In 2021 Insight enhanced its counterparty engagement process to achieve a greater level of impact with these entities, leveraging its influence to engage banks on issues including the environment, remuneration, diversity and cyber. Insight also introduced central engagement themes to guide the work of its analysts across relevant investment portfolios.

Bruce Murphy, Director, Australia and New Zealand, said: “Investors are increasingly focused on ESG and the potential for portfolios with financial and sustainability targets. For us, a first principle of investing responsibly means managing risk. This includes risks to the wider market, as well as the specific underlying risks that determine whether an investment is fair value.”

——–

[1] Responsible Stewardship at Insight
[2] As at 30 June 2022. Assets under management (AUM) are represented by the value of cash securities and other economic exposure managed for clients. Figures shown in AUD. FX rates as per WM Reuters 4pm spot rates. Reflects the AUM of Insight, the corporate brand for certain companies operated by Insight Investment Management Limited (IIML). Insight includes, among others, Insight Investment Management (Global) Limited (IIMG), Insight Investment International Limited (IIIL), Insight Investment Management (Europe) Limited (IIMEL) and Insight North America LLC (INA), each of which provides asset management services.
[3] As at 31 March 2022

The post Seeking increased outcome certainty for asset owners by influencing policy makers and bond issuers appeared first on AdviserVoice.