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In this Fiduciary Investors Series podcast Amanda White talks to Ash Williams, the executive director and chief investment officer of the Florida State Board of Administration about managing a large institutional portfolio in a time of crisis.
Drawing on his decades of investment experience, which included returning to SBA in October 2008, Williams discusses the investment opportunities in the past six months including the move to more active management in equities, and a larger allocation to distressed.
Williams says the most important thing in a crisis is to position your portfolio for liquidity requirements, with liquidity the only difference between “being a predator and prey”.

About Ash Williams
Ash Williams has earned a reputation for being able to head into the stormiest of investment markets and still show positive returns that outperform benchmarks and impress colleagues.
As executive director and chief investment officer for the Florida State Board of Administration, Williams is responsible for managing approximately $200 billion in assets, including those of the Florida Retirement System, the fifth largest public pension fund in the United States. The fund provides retirement benefits to more than 900,000 current and former public employees.Williams also chairs the Managed Funds Association’s Institutional Investor Advisory Council, the Alternative Investor Forum’s Investor Board and the Council of Institutional Investors’ Board of Directors. He is a member of the National Institute for Public Finance Board of Trustees and the Florida State University Foundation Board of Trustees.Additionally, he serves on investment committees for the Episcopal Diocese of Florida, the Community Foundation of North Florida and the Institute of Electrical and Electronic Engineers. He also is an advisory board member for the Robert Toigo Foundation and Fidelity Institutional Asset Management.Williams is the 2017 recipient of Chief Investment Officer’s Lifetime Achievement Award and a 2017 recipient of the FSU Faculty Senate Mores Torch Award, recognizing respect for FSU’s customs, character and tradition.Prior to joining the SBA, Williams was a managing director at Fir Tree Partners and president and chief executive officer of Schroders, both investment firms based in New York City. Williams previously served the SBA as executive director from 1991 to 1996 and in senior management positions in Florida’s executive and legislative branches.Williams received his bachelor’s degree in management and a Master of Business Administration (MBA) from Florida State and completed post-graduate programs at University of Pennsylvania’s Wharton School and Harvard University’s John F. Kennedy School of Government.

About Amanda White
Amanda White is responsible for the content across all Conexus Financial’s institutional media and events. In addition to being the editor of Top1000funds.com, she is responsible for directing the global bi-annual Fiduciary Investors Symposium which challenges global investors on investment best practice and aims to place the responsibilities of investors in wider societal, and political contexts. She holds a Bachelor of Economics and a Masters of Art in Journalism and has been an investment journalist for more than 25 years. She is currently a fellow in the Finance Leaders Fellowship at the Aspen Institute. The two-year program seeks to develop the next generation of responsible, community-spirited leaders in the global finance industry.

What is the Fiduciary Investors series?
The much-loved events, the Fiduciary Investors Symposiums, act as an advocate for fiduciary capitalism and the power of asset owners to change the nature of the investment industry, including addressing principal/agent and fee problems, stabilising financial markets, and directing capital for the betterment of society and the environment. Like the event series, the podcast series, tackles the challenges long-term investors face in an environment of disruption, and asks investors to think differently about how they make decisions and allocate capital.

The PRI will focus on a number of key areas in the years ahead including helping signatories invest in line with the SDGs and social issues, and pushing for more engagement.

Over the next five years, the PRI aims to drive real world outcomes in line with the SDGs. Speaking at Sustainability Digital, Fiona Reynolds, CEO of the UN-backed organisation, said the SDGs are the world’s business plan and have never been more important, adding that there is no need for a new plan – the world needs to implement and fund the one it has.

Estimating that the funding required to meet the SDGs from the private sector is between $5-7 trillion a year, she urged delegates to think about how they could shape outcomes. She also pointed to the PRI’s ongoing work on fiduciary duty regarding sustainability: if investors are going to implement sustainability, she said the law needs to catch up.

Elsewhere, she outlined the PRI’s ambition to improve data on sustainability. Calling the lack of data “a roadblock,” she said the PRI will work harder to help plug the gap.

The PRI also aims to elevate social issues, said Reynolds. Over the years social issues have taken a “back seat” compared to governance and climate issues. She said many institutional investors are both unaware and unclear as to how to work with investee companies to improve their record on social issues and human rights. With the COVID-19 crisis providing momentum, the PRI is launching a new five-year program on human rights that will push these issues centre stage.

Reynolds said she also wanted to introduce a new era of stewardship that moves beyond box ticking to focus on the most pressing systemic issues facing the world. Investors can’t engage on everything. It means the need for a clear agenda is all the more compelling, ensuring investors effectively use their leverage. She added that the PRI will also focus engagement on net zero commitments.

“This is the future of engagement,” she said.

Regarding net zero, she also urged investors themseleves to commit to net zero by 2050 across their entire portfolios. Shorter term targets should mark the route, she said.

Reynolds said that the PRI was going to increase accountability amongst its signatories. From next January, signatories will be asked to report on outcomes and the PRI will also increase the minimum standards needed to join the organisation. She noted that although the PRI is a “big tent” organisation that doesn’t want to set the bar too high for new signatories, it had to be made “harder.”

Reynolds explained that the PRI’s new focus comes in the wake of rapid take up in ESG in recent years. The PRI launched in 2006 with 50 asset owners and the aim to bring sustainability to the capital markets. After slow progress, in the last three to five years ESG has gone mainstream and responsible investment activities have matured, she said.

Although there is much more to be to be done, she said the PRI is beginning to widen its focus to investors’ role in driving real world outcomes that impact the world we live in. She noted that this required a different way of approaching and implementing responsible investment which, in one silver lining, has received a boost from COVID-19.

“The world has finally woken up to the importance of sustainability and the interconnectedness of the world we live in,” she said.

To hear more of the PRI’s plan for the next five years listen to Fiona Reynolds speak to Amanda White in the podcast, Sustainability in a time of crisis.

For all the conference sessions, stories and white papers visit the Sustainability content hub here.

Political and social systems, like physical landscapes, have non-linear dynamics that suddenly reach tipping points after which there is no going back. Investors should ready their portfolios, urges Professor Cameron Hepburn.

The whole economic system needs to change to deliver sustainability, said Professor Cameron Hepburn, professor of environmental economics, University of Oxford.

Speaking at Sustainability Digital, Hepburn opened with a warning that physical systems are not necessarily linear. The rapid melting of Greenland’s ice sheet holds the risk of it reaching a tipping point “and the whole system collapsing.” Similarly, social and political systems can reach a tipping point triggering huge and sudden change.

The Berlin Wall fell bringing with it the downfall of a whole system of economic thought.

“Is capitalism in peril?” he asked. “We are approaching a critical point.”

He told investors that they can’t drive looking in the rear-view mirror or walk backwards towards a cliff edge. Investors need to understand, and piece together, the risks ahead.

Like other speakers, he said the pandemic poses an opportunity. Governments are pouring trillions into the rescue and recovery and should ensure the money goes into assets fit for purpose. The signs are encouraging. He said the last crisis “did a few percentage points” for sustainability but in contrast some countries today have put nearly half of their stimulus to green initiatives, others have allocated 25 per cent.

Hepburn noted “strong support” among governments to put money to the green stimulus. In what he called a juncture, and break in the system triggered by the pandemic, he said many governments have realised this is a moment to push hard on sustainability and the SDGs. Quoting statistics that point to 80 per cent of people in China, Mexico and India wanting a green recovery he said the “world is not linear” and that investors needed to “have a handle” on how system dynamics could affect their portfolios.

Flagging possible change in the future, he asked delegates to consider the prospect of the main accounting firms requiring Paris-aligned accounts.

“If you aren’t reporting on these numbers are you misleading your investors,” he asked. He urged investors to think how their portfolios would be affected by a net zero world and in another aside, questioned the oil price assumptions made by some of the big oil companies.

A Paris-consistent oil price, whereby demand falls away as the world moves towards net zero, puts oil at around $20 a barrel, he said. In contrast, some oil groups price oil at around $80 a barrel.

“Is this justifiable in a Paris-aligned world,” he said, urging investors to rethink and adjust their capital allocations accordingly.

“The point to take away is that this is about non-linear dynamics and systemic change. You need a good understanding of tipping points so as not to be caught short in years to come,” he said.

Hepburn detailed how he and colleagues are also exploring sensitive intervention points that could accelerate the transition to net zero. For example, what kind of strategically targeted law suit could create a precedent that forces change, he said. Alternatively, what kind of joint political announcement could trigger change in governments’ response to climate change. In another hypothesis, the team of researchers are asking what kind of technology could massively accelerate the transition.

Hepburn said money (the kind we haven’t seen before) flowing into the green stimulus is going to change cost structures and the way different technologies “roll out.” He said that countries have “all to play for” noting leadership in Europe, and casting ahead to China’s next five year plan.

“China is thinking this through right now,” he said, forecasting China pushes hard on clear energy but still has big sources of dirty energy too.

“As for the size of America’s green stimulus? Everything hinges on the election.”

Hepburn said that governments are key actors and reiterated the importance of a carbon price, calling it potentially transformative. However, he said other levers are also at play in the world’s move to sustainability.

“A carbon price is not the only intervention,” he said. “We need to paint on a broader canvas.”

To access more of Professor Hepburns comments on systems thinking you can listen to the Fiduciary Investors Series podcast here.

For all the conference sessions, stories and white papers visit the Sustainability content hub here.

Michelle Ostermann, managing director of investments at Railpen which manages £30 billion in assets for the Railways Pension Schemes in the UK, discusses the pension fund’s continued evolution.

In this Fiduciary Investors Series podcast Amanda White talks to Michelle about the organisational change at Railpen – including more assets in-house, a new investment decision making framework, and an increased allocation to private assets – the importance of culture, and the intimate relationship between the fiduciary management and investment teams.

About Michelle Ostermann

Michelle Ostermann is responsible for the overall management and continuing development of the Railway Pension Scheme’s investment management capability. Her primary focus is to ensure it attracts and retains the best possible talent to achieve the long-term investment goals.She joined Railpen in January 2019 as chief fiduciary officer and was appointed managing director in December 2019. She has 25 years’ experience in the investment, insurance and pension industries. She joined Railpen from British Columbia Investment Management Corporation where she was senior vice president responsible for investment risk, strategy, research, and corporate relations. She has a Bachelor of Science degree in Economics and holds a Chartered Financial Analyst designation.

Unilever’s former CEO Paul Polman advises CEOs pushing sustainability to treat investors and the financial markets as allies – and ignore sustainability at their peril. “You will be voted out”, he warns.

CEOs wanting to do more to integrate sustainability shouldn’t fear their investors.

“The majority of investors are investing for the long-term,” said Paul Polman, former CEO of Unilever and co-founder and chair of IMAGINE, a benefit corporation and foundation accelerating business leadership to achieve global goals. Speaking at Sustainability Digital, Polman advised CEOs that financial markets are an ally in the transition, however he warned that corporate boards do need education.

He urged companies to seek out their investors and better understand the power of sustainable and equitable economic models. Once their own house is in order, he said CEO’s should seek to integrate sustainability across their value chains and join wider initiatives. Although he said companies can’t solve issues overnight, he warned companies that don’t embark on sustainability will be relegated to a graveyard of corporate dinosaurs.

“Companies that are successful are running businesses for the long-term; less bad is not good enough anymore,” he said.

Rio Tinto’s chief executive Jean-Sébastien Jacques recently stepped down following criticism of the mining giant’s destruction of two ancient caves in Pilbara, Western Australia is a case in point.

“It goes to show that CEOs will increasingly be voted out of office if the companies they run ignore sustainability,” he said.

The lifespan of the typical CEO of a publicly traded company is now around 15 years in an environment where employees “walk out” and customers “pick companies in line with their values.” Meanwhile, he said financial markets are starting to move in a reflection of the impact of corporate mistakes on a company’s reputation and performance.

Polman, who a United Nations-appointed ambassador for the SDGs, told delegates that not only do the SDGs offer a key framework they are a big business opportunity and becoming bigger still.

He said that most companies in the private sector are aware of issues around climate change, deforestation and inequality, but noted the ability to find solutions at speed is impeded because of the lack of global governance.

“Institutions are not equipped to operate effectively in today’s environment,” he said. He also noted that a lack of transparency and data – given our ability to only “treasure what we measure” – are barriers to progress.

Polman said decarbonising economies, moving financial markets to the long term and creating a circular economy required leadership.

“It requires leaders in the financial and business sector to step up and put interest of others ahead of their own,” he told delegates. Moreover, the chance for change was missed after the GFC.

“We didn’t address the major issues and climate change continued,” he said, noting that only 2.5 per cent of the post-GFC stimulus was spent on green initiatives. Sounding an encouraging note, he urged governments and companies to use the stimulus to create resilient jobs and solve youth unemployment.

“Now we are smarter,” he said.

Elsewhere, he said that the doctrine of self-interest and short-termism isn’t synonymous with human activity. The problem is also rooted in a system designed and shaped in a different time when resources where abundant and capital was scarce. In contrast today we have scarce resources and abundant capital, he said. He also noted that people operate within the boundaries they are told to operate within.

“Boundaries decide our behaviour and what we see,” he said. Adding that politics only deals with symptoms and not the underlying cause.

Citing Unilever’s experience of stopping quarterly reporting in a deliberate strategy to look longer term, he urged other companies to also think long term. He called for a price on carbon and said that companies needed to move to focus and value returns on other areas of their capital including social and environmental.

Polman said that engagement does work, but should include engagement across the value chain spanning asset owners, managers and companies. He also said that ESG as an add on doesn’t work.

“I don’t get the idea of a fund with an ESG add on,” he said. “It should be core to the business. We need to collectively muster the courage to drive bigger transformative changes. The cost of not acting is significantly higher than cost of acting,”

Princeton University Professor of International Affairs, Stephen Kotkin explains why large global investors and multinationals can lead on sustainability but national governments fail.

Apocalyptic portrayals of the future have failed and sustainability needs to make much more of the fact that doing the right thing also equates to better returns. Speaking at Sustainability Digital, Stephen Kotkin, Professor in History and International Affairs at Princeton University, urged delegates to make much more of ESG’s superior returns. He said shaming and virtue signalling doesn’t work.

Apocalyptic portrayals only galvanise those already galvanised; elsewhere it leaves people paralysed, he said.

“The data shows ESG adoption is not about being virtuous but about superior returns.”

He said that ESG needed to offer realistic solutions and build patiently from the ground up, adding that sustainable politics entails building coalitions and incentives. For example, surveys suggest people want to be green but when they are asked to make green choices, many opt not to.

Referencing William Nordhaus, Sterling Professor of Economics, Yale University speaking in an early session, Kotkin said the current approach is failing because there are no sticks.

Kotkin said that solidarity only exists on a national level, yet global integration requires global solidarity.

“People are global citizens – but only in a small way,” he said. “Governments are only accountable to their own voters.”

Although global policy is aspirational and sought after it is only apparent in two important areas: multinational business and global investment.

Citing the likes of US pension giant CalPERS or multinationals like Unilever he said they can act globally and engender global politics.

“This is where you get global politics,” he said, adding that governments can only be held to account at a national level because people can only vote at a national level.

Kotkin also looked at how the pandemic was playing out in authoritarian regimes.

“The bigger the crisis, the more they can justify the lack of accountability,” he said. However, he said authoritarian regimes do not like a crisis they haven’t manufactured; a real crisis requires governance, solutions and adaptability as well as the free flow of information. Authoritarian regimes have not done as well in the pandemic, he said. “They are great when the enemy is imagined,” he said.

Even if a global solution to the world’s biggest challenges looks impossible, he told investors that they should continue trying to solve the problem and increase ESG performance.

“Don’t throw up your hands, build patiently.”

He said the hydrocarbon industry did not appear overnight, and similarly, finding an alternative will take time.

He also urged delegates to rely on data, drawing their attention to important data behind recent racial injustice in the US. America’s black middle class has doubled in size since the 1970s while the black upper classes have quadrupled and the number of black academics has also risen.

He said this was far from meaning “the problem is solved” but that thinking “we are back where we were” is similarly false.

“When we deal with aims and goals it needs to be based on data and not based on Twitter and TV images. This type of media plays up the violence and discrimination, making the challenge bigger than it is in reality,” he warned.

He said that science will ultimately solve the problem of nuclear waste, while the biotech industry is advancing healthcare. Elsewhere, agriculture is growing food without soil and 3D printing could potentially change patterns in global trade. Against these sweeping changes, he lamented the lack of change in the power sector.

He urged institutional investors to adapt and change and build expertise in new asset classes, “equipping themselves for the next economy.” Expertise in real estate and commodities may not be the asset classes of the future.

“How do you get the expertise you need tomorrow? For an organization this is not easy because you are talking about people,” he noted.

Kotkin said the bravest people always go first, and then others follow.

Looking ahead to the US election, he said politics should involve building a coalition in the middle rather than building from the far left or far right. This made you a minority that “can only win through manipulation.” He noted that America’s swing states would play a pivotal roll in November’s result and warned of possible chaos in the election’s aftermath.

“Our institutions are stronger than predictions and American people are more sensible than the polarisation portrays,” he concluded.

For all the conference sessions, stories and white papers visit the Sustainability content hub here.