In episode 96 of the [i3] Podcast, we speak with Maria Elena Drew, Director of Research – Responsible Investing, T. Rowe Price about the challenges and opportunities of transforming investments into net zero portfolios. How does it affect your objectives and engagement with companies? Enjoy the show!
Overview of Podcast with Maria Elena Drew, T. Rowe Price
01:00 When I was at school, I didn’t think this was a career path that was out there. At university I studied economics and geology.
04:00 As a young analyst I covered Enron and they had a very bullying approach to investors
06:00 I realised ESG was not about telling you what you can and can’t invest in, but to use information on governance and environment to get better investment ideas
07:00 I started to ask at least one ESG-related question in company meetings and without fail the answer was helpful to me
10:45 The ability to determine whether there is alpha generation from ESG is really difficult
15:00 What is your true net zero objective? Do you want to have no exposure to high emitting companies? Or do you want to help companies with their transition to net zero? Those are two very different portfolios
19:00 Track progress along the way: setting net zero status targets
20:45 We think the net zero status is a smart way of going about it, because it is forward-looking
23:30 If your objective is really just greenhouse gas emissions, then you really just incentives your manager to do sector selection
28:00 Divestment ultimately sits with the client direction
29:00 An exclusion list makes more sense for passive investors, than for active investors
31:00 If you don’t have a decarbonisation [plan], then you are making a very strong bet that all of this regulation is not going to come through
33:00 What if institutional investors leave it up to companies to sort this out? What risks do they face?
36:00 Do you allow companies to rely on carbon credits/offsets to achieve their net zero target?
40:30 Pushing companies to go too fast can be counterproductive
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[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe. The [i3] podcast is available on iTunes, Google Podcast, Spotify, Amazon Music, or your favourite podcast platform.