Young ESG veteran sees move to mainstream

Partner and global head of Mercer’s responsible investment business, Jane Ambachtsheer, has received a lifetime achievement award for her commitment to socially responsible investment in Canada. She spoke to Amanda White about what it’s like to be a life-time achiever at the age of 36, and what still needs to be done in integrating ESG into portfolios.

Jane Ambachtsheer has achieved a lot in a short time. She played a pivotal role in the development of the United Nations Principles for Responsible Investment, as the consultant to the United Nations responsible for co-ordinating the development of the principles.

She set up and runs Mercer’s global responsible investment business, with staff in all corners of the globe; she has a BA from York University and an MA from the University of Amsterdam; and has lived in Amsterdam, London and Toronto. She is now the honourary recipient of the Social Investment Organisation’s 2011 Canadian Lifetime Achievement Award (not to mention the mother of two small children). And she’s only 36.

Clearly she’s an overachiever! Mind you, not everyone grows up with pension governance as the topic of dinner table conversation.

When she was in her final year of university, Jane researched her father Keith’s book – Pension Fund Excellence – and it was also Keith who offered her “my first real job” at CEM Benchmarking.

“It feels great and a real honour,” she says of her recent award, “the reality is our industry is still relatively young, and so when you’ve been in it for 10 years, it’s a chapter.”

Each year, she says, her job is getting harder, working in an area that was relatively niche but has now become mainstream.

As an adjunct professor at the University of Toronto she teaches a course on responsible investment, and she says the preparation time is getting greater every year.

“The amount of activity and reading is snowballing,” she says. “There is new research, new product in different asset classes and regions and issues of integration. There’s a lot of opportunities, a lot of push, pull, it’s a moving beast.”

There isn’t a perfect way to integrate ESG, she says, and for an asset owner it is very dependent on size, the beneficiaries, the asset allocation, risk tolerance, the amount of active and passive, internal or external management, and the regulatory environment.

“There are a million questions and still a lot of education before it comes to strategy. We still meet with investment committees who have the opinion that SRI is negative screening and they can’t do that as a fiduciary. So there is still a lot of education needed.”

However she says the wedge is firmly in place.

“The ship has turned towards ESG integration, it is a slow moving ship but it’s hard to turn.”

She points to the financial crisis as an example of ESG momentum.

“With all that happened during the financial crisis, ESG could have been dropped, but it wasn’t – it was embraced.”

And now many large institutions are working their way through ESG integration – with CalPERS, as an example, holding an ESG workshop next week.

Ambachtsheer doesn’t use the term SRI, she prefers to talk about responsible investing as the integration of ESG factors into the investment process, and climate change, she says, is a big part of that.

“Climate change, the risks and opportunities it poses, is a useful topic to speak with people who aren’t down the path of being a responsible investor. Climate change is a discrete issue, a useful opportunity,” she says.

The attention that Mercer’s recent study on climate change received from all over the world, is an example of the increasing interest in the area.

It was downloaded 5,000 times from the Mercer website, a significant number, seeing Ambachtsheer said she would have been happy with 500 times.

She believes there will be a significant number of changes as a result of climate change.

One of the findings of the study was that 10 per cent of total risk is from climate change policy alone.

At the moment other investment risks, that have less than 10 per cent, have significantly more tools spent on assessing and hedging those risks. The time, money, resources and governance on managing that 10 per cent exposure to climate change policy will increase, she says.

But there is still a lot to be done if institutional investors want to seriously influence climate change policy, or indeed any public policy.

“On one hand, investors should be applauded for collaborating on international policy. But if you take a step back and look at the long horizon, and what investors are lobbying for, then you look who’s lobbying on the other side and the arsenal they’re employing, they have hundreds more in investor engagement,” she says. “Investors are not short of money, but they haven’t evolved.”

She says the next step is for investors to look at the appropriate collaboration vehicles, how to pay for them and govern them, how to measure the performance and value of them, and make decisions about allocating resources to them.

“The area of collaboration is a huge issue and it is very complex. A lot of engagement has been driven by individuals – who are passionate and informed – who have been championing ideas. But investors need to step back and say if I have 200 hours of engagement this year, how should I do that, should I do it myself or engage someone, and prioritise that,” she says. “There is NGO competition which is both healthy and not healthy but it is not efficient for the investors. There is a lot of work to be done, to prioritise issues, to co-ordinate across issues, sectors and corporate engagement. With more global activity, and the growth of independent initiatives, they are overlapping but not co-ordinated, we need to look at how to manage that.”

After a busy 2010, Ambachtsheer says her team is inward looking this year, focused on embedding ESG ratings that have already been developed and the climate change research to the wider market.

“We have more than 4,000 ESG ratings but they are not fully embedded into all the advice we give. We are assessing that, and for the first time looking at some analysis of ESG rating performance.”