The Archbishop emphasised that even in the context of an ethically-screened fund, there is no such thing as absolute purity, and every business can be challenged around ESG factors to varying degrees. For the investor, publicly stating the intention to take a responsible approach also raises expectations and creates reputational risk. Where concerns are material, disinvestment is of course an option, but for an investor adopting a responsible stance, vigorous engagement can prove effective in improving practices. He argued that “investment without engagement is irresponsible investment”.
Looking to the future, the Archbishop suggested that a marked shift in the responsible investment landscape is taking place – one that will accelerate and mature as the millennial generation makes itself increasingly felt in terms of its investment decisions. That transition is from responsible investment’s origins as an approach typically orientated around ‘avoiding harm’ through negative screens to one with greater emphasis on ‘doing good’. The drivers of this move are clear and none more so than climate change – a global issue that raises many questions including those around our social contract with future generations.
Over time, it’s likely that the theme of ‘doing good’ will pervade all investment activities – a trend exemplified by initiatives like the Transition Pathway Initiative, which aims to assess and encourage companies’ preparedness for the transition towards the low carbon economy.