2019-09-28【VCAF Seminar Review】 - ESG: Investing In Our Future
On the 28th of September 2019, VCAF had invited three keynote speakers, Dr. Rupini Deepa Rajagopalan from Berenberg Bank, Ms. Yanling Zhu and Mr. Daniel Sailer from Metzler Asset Management, who shared with us their insights with regards to their ESG investment philosophies (ESG stands for Environmental, Social and Governance).
Moderator Mr. Yang Jiao
There were almost a hundred participants from different cities in Germany who attended the seminar, and all the available seats were filled up for the event at the Guang Hua Media Centre. As usual, Mr. Yang Jiao from Citigroup Global Markets Europe AG moderated the seminar, and Chairwoman Ms. Xiaofeng Fu began with a brief review of VCAF's history and upcoming events.
Referentin: Dr. Rupini Deepa Rajagopalan
The first speaker was Dr. Rupini Deepa Rajagopalan, Head of the ESG Office at Berenberg´s Wealth and Asset Management division. She was previously a junior professor at the University of Hamburg before joining the second oldest bank in the world. The key takeaway of Dr. Rajagopalan's presentation can be summarized in three aspects: managing risks, enhancing return and positive impact. She started with explaining the concept of sustainable investing which is core of their ESG investment philosophy. She states that ESG investing helps to identify and quantify risks that are overlooked by traditional financial metrics. For example, identifying company's impact on the environment via its CO2 emissions, its use of child labor or even corruption and bribery in the company. Apart from just investment returns, investors are paying increasing attention to the sustainability and ethical impact that their investments have on both society and the environment. There is growing evidence that institutional investors and asset managers are using ESG frameworks for screening and identifying ESG investment opportunities and risk. Thus, the growing trend of using ESG criteria in investment decisions and the growing market share of Socially Responsible Investing (SRI) products (also used at times synonymously with sustainable investing or ESG) is in turn making an impact on company behaviour.
Referentin: Frau Yanling Zhu
In the second presentation Ms. Yanling Zhu, Head of China-Desk at Metzler Asset Management, shared with us the sustainable investment strategy of the company. As asset manager, Metzler also emphasise the ESG in addition to alpha (excess returns) in the active investment strategy. With the charts showing the MSCI ESG rating of emerging markets (including many Chinese companies), Ms. Zhu mentioned that companies in developing countries have relatively low ESG score/rating at this stage, but they are rapidly improving and catching up. The MSCI ratings are mainly based on sustainability reports and other public available information. In order to obtain more accurate information, it is also encouraged to engage with invested companies in order to ensure that the ESG conditions are in line with Metzler's internal standard. In addition, the investment team at Metzler also exercise proxy voting in the shareholder meeting, aiming to be more supportive of the sustainable development of the invested companies.
Referent: Herr Daniel Sailer
Mr. Daniel Sailer, Director of ESG Strategy & Advisory at Metzler Asset Management, shared with us the company's history of adopting an ESG Strategy. Metzler aims to ensure that all its assets under management are sustainable investments. Traditionally, equity selection process includes such factors as return, liquidity and risk. Besides, sustainability becomes another increasingly important factor for consideration in the recent decade. Sustainability initially started as an extension of the risk-averse factor. For example, the investment manager may refrain from investing in a company with certain negative track records, and it later developed into a unique assessment methodology. He also demonstrated by charts that the ESG rating scores were lagging indicators in any adverse events where equity price were much more sensitive in comparison. He also showed us an interesting finding that, by excluding the controversial companies in the MSCI World Index, the yield is actually slightly better than the MSCI World Index itself (the evaluation is based on the criteria in the UN's various organisational reports). In addition, Mr. Sailer also mentioned some controversial criteria defined by MSCI from a data provider perspective. For instance, the country weights may led to the relatively low scores in governance (the "G" factor) for family businesses in Germany, in which case the Metzler team would take other factors into consideration.
From left: Mr. Jun Hong (Panel Discussion Moderator), Dr. Rupini Deepa Rajagopalan, Mr. Daniel Sailor
Mr. Jun Hong, senior parent account coverage manager/Director at Citigroup Global Markets Europe AG, moderated the Panel Discussion session with a number of inspiring questions. In the Q&A session, the members of the audience have also been very active with questions from different angles. For example: What are the main differences between Social Responsible Investing (SRI) and ESG? Does the ESG factor have other implication except from the stock market? Is the MSCI score reliable? How do companies maintain investment returns when they have a higher ESG rating? The discussions have not only extended the topics, but also provide organic feedbacks to the speakers in different perspectives.
From left: Dr. Rupini Deepa Rajagopalan, Ms. Xiaofeng Fu, Mr. Daniel Sailor, Mr. Jun Hong, Ms. Yanling Zhu
Finally, we would like to thank the guest speakers, the moderators, all the attending participants and the VCAF team. Also special thanks to the Guang Hua Media for providing the venue. Looking forward to seeing you at our next event in November!