Schroders Global Investor Study 2020 found that the majority, 55%, of American investors are more likely to invest in sustainable funds because of their more attractive return profile. This is a big turnaround from when Sarah Bratton Hughes, head of sustainability – North America at Schroders, joined the asset manager in 2011 and fell into sustainable investing by accident.
Bratton Hughes told Markets Media: “Sustainable investing accelerated faster than I expected and will continue to do so as long as we provide economically viable solutions.”
The asset manager surveyed more than 23,000 people who invest from 32 locations globally, including 2,000 in the US. The study found that higher returns, rather than just positive societal and environmental impacts are driving Americans’ adoption of sustainable funds.
Bratton Hughes described 2019 as the “year of Greta” as it was the first time the survey found greater interest in sustainable investing across generations. Interest from Gen X outpaced millennials due to the protests from Greta Thunberg, the Swedish environmental activist.
She described 2020 as the year of “corporate karma” as the Covid-19 pandemic and the Black Lives Matters protests led to investors focussing on the ‘social’ in environmental, social and governance factors. Human capital management and the treatment of workers were at the top of American’s concerns regarding corporate behavior in the survey.
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Bratton Hughes said this years survey showed an increase in interest from boomers due to the strong performance of ESG funds, especially during the pandemic, and their long-term value creation
“2020 has proven to be a turning point as the evidence is increasingly clear that investing sustainably could lead to better long-term outcomes,” she added.
She continued that the conversation is also switching from risk mitigation to value creation.
“Decarbonization and energy transition to renewables are the next investment trend,” Bratton Hughes said. “There are opportunities for returns as trillions of dollars will be invested across the supply chain.”
At Schroders sustainability is integrated across all desks and asset classes according to Bratton Hughes and last year the firm acquired a majority stake in impact investor BlueOrchard.
Peter Harrison, group chief executive, said in the firm’s half-year results: “ESG is of critical importance. We recognise that we have a responsibility not only to our clients and shareholders, but also to wider society and the communities in which we operate. As an active investor in many companies, we continue to be engaged in supporting them through this challenging period.”
ESG Data
The rise of ESG has led to demand for more data to measure the impact of investments.
For example, Bratton Hughes said the measurement of social impact can include data on turnover, pay gaps or even reviews on Glassdoor, where employees rate companies.
“There is no silver bullet for sustainable investment,” she added. “You need to engage with management and develop your own tools to quantify risks and opportunities in hard dollars.”
Last year Schroders launched SustainEx, a proprietary tool which the asset manager said was the first framework that attempts to translate social and environmental impacts into financial costs or benefits.
SustainEx analyzes more than 47 measures of social and environmental impact, examines over 400 academic and industry studies and reviews over 70 available company-specific data points, as well as using unconventional data from relevant public sources. The model then calculates an annual cost or benefit created per $100 of revenue the company produces.
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She continued that data will improve due to initiatives such as the new European Union taxonomy which sets standards for disclosures.
“The CFA Institute is also consulting on voluntary ESG disclosure standards for investment products,” she added. “In five years we could have GIPS-style disclosures for funds which are not mandatory, but client-driven.”
The CFA Institute, the association of investment management professionals, recommends Global Investment Performance Standards (GIPS), industry-wide ethical principles on how to fairly calculate and present investment results, with the aim of improving performance transparency and comparability.
Career path
Bratton Hughes described her path into asset management as unconventional as she went to St.Francis College on a basketball scholarship. She first worked for JP Morgan before joining Schroders in 2011, where she was inspired by working under Jenny Jones, the former head of Schroders' US Smaller Companies and US Mid Cap funds who retired last year.
“I was the millennial on the team so Jenny made me the go-to for sustainability questions,” said Bratton Hughes.
Her advice to other women is to believe in yourself and find work that you are passionate about, such as sustainability. She describes having a “light bulb” moment walking along a street in Brooklyn.
“I realised that I needed to take this opportunity and run with it,’ she said. “I was lucky to have people to cheer me on such as Tiffani Potesta, chief administration officer, and Bob Kaynor, Jenny’s replacement.”
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In. 2018 Bratton Hughes became product manager, US equities and sustainability/ESG, Americas before taking on her current role in March this year. She is part of a 22-strong sustainable investment team led by Andy Howard, global head of sustainable investment. The team are responsible for analysis, engagement, voting and facilitating ESG integration into investment processes across teams and asset classes.
She said Schroders has actively engaged with firms that have all male boards as diversity improves performance.
“We have said we will vote against them if they do not add women,” she added. “As active investors and with our expertise in small and mid-caps we can also recommend talent.”
Schroders had set originally set a target of 30% females in senior management by the end of last year, from 25% at the end of 2015. The asset manager achieved 30% in 2017 and increased the target to 33% by the end of 2019.
The firm said in a report: “During 2019, the number of female senior managers rose from 263 to 270, so at the end of 2019 32% of our senior management were female, just short of our new 33% target.”
