Marina Severinovsky who took over te role as head of sustainability for North America for Schroders in January discusses how the fund manager looks at sustainability in North America
Can you please tell me what is your day to day role is at Schroders?
As the cliché goes, there is no typical day to day! The role that I have is really fun as it is like a hub in the wheel, and there are many spokes attaching you to lots of different efforts across the business.
So in pushing the sustainability effort forward in the US, my role covers elements of both product development and supporting our investment teams as they enhance their ESG integration or move down the path to sustainable or impact offerings, or as they seek to better leverage our central tools for their research, reporting and active ownership efforts. Another component is working with policymakers, regulators and industry bodies to help drive the direction of travel in terms of how sustainability develops in the US.
I may also be spending time with my clients, from our external clients and prospects, to whom I am conveying our capabilities or offering our partnership, to my internal clients, who are the sales teams, to ensure that they are educated and trained on our approach, have the collateral and support they need from me, and are comfortable being at the forefront in terms of telling our story. In every role I have had at Schroders, sales teams have been my internal clients, so my goal is always to be proactive, responsive and easy to work with, so that they always want to come to me! Another thing I may do on a given day is push forward key projects or initiatives around things like joint research or co-engagement with clients, roundtables and other events, designing bespoke solutions for clients, and providing education and knowledge share.
Furthermore, I may on any given day be working with our communications teams on different campaigns or initiatives, or working with our PR team and doing various types of press, or creating content, like presentations, articles, white papers and blogs (which I especially love doing, as I grew up wanting to be a novelist, so this is now my creativity outlet), or speaking at industry events to share our message.
How do you plan to develop the group?
Luckily, we already have tremendous resources and support. One of my favourite roles is being a conduit between the US market and the central sustainability team in London, which includes very thoughtful thematic researchers, integration experts, great active ownership, engagement and voting professionals, and a robust data and models group.
We also get a lot of support from our networks of ESG specialists who sit on various investment desks or sales teams and client support teams, and are empowered to lead ESG efforts on their desks and in their groups. At the end of the day ESG is not about our 30+ central team professionals, ESG is about our entire firm and everyone who works here. Schroders has made ESG a defining characteristic of our brand and business.
What are some of the challenges of integration and are there any specific to North America?
The main challenge around ESG integration is that it has become so prevalent, in the sense that everyone is purporting to be doing it. Given the momentum and the structural trends globally from a policy and regulatory standpoint, especially around decarbonisations, but also around addressing social ills, everyone feels pressure to be on this train. But the real challenge of course is that the application of these efforts is very varied. Third party rating agencies are concerned with it too, but are also part of the challenge, given the differences in their measurements. So both for issuers and managers who are trying to hold themselves to a higher standard the challenges are definitely there.
In the US, we have the additional challenge that our investor base is earlier in their journey, so requires on average a lot of additional support and education, and also that their priorities can differ quite markedly across geographies, age groups, political affiliations, and investor types, such that some of the global narratives (for example, all-in on climate all the time, and more fossil fuel exclusions rather than less) do not resonate here. We can’t simply import the same approaches and conversations other regions have used; we have to ensure that we take a client-oriented lens and that we try to meet US investors where they are and show that sustainability is certainly a broad enough discipline to address their interests as well. We have to be pragmatic about articulating the risks and also the opportunities in the ongoing trends so that clients can see how this benefits them, and we have to do this in a comprehensive way across thought leadership, thematic research, company engagement and product development.
How do you see ESG evolving in investment management?
I see ESG efforts in investment management becoming more nuanced. We are moving to a place where simple integration of ESG characteristics to fully take into account risks and opportunities is becoming expected and table stakes.
From here, the continuum moves to sustainable investment, where we are actually promoting ESG characteristics and also adjusting the investment universe so that some subset of companies who really are laggards are less likely to be included. This does not mean that we can’t support and finance companies as they evolve and transition, provided that they are willing to do the work to get there, but the bar becomes higher. And beyond that, the continuum moves to more thematic SDG (UN Sustainable Development Goals) investing and impact investing, where we are trying to achieve specific outcomes alongside financial returns because that is how clients are choosing to express their priorities and values.
For example, in areas like decarbonisation, this will mean movement from simple emissions reduction in a portfolio, to investing in climate mitigation technologies, to potentially actually moving into climate solutions, like natural capital investments and carbon sequestration. Another big shift for the investment management space is in active ownership, on the realisation that we cannot stop the investment process at the point of choosing better positions, but must really focus on how we can enhance those positions once we hold them.
I think the industry recognises that divestment, on the scale needed to meet decarbonisation pledges, is not feasible, and would not allow us to build diversified and robust portfolios, so therefore active influence is the path forward, in terms of supporting investee companies in their own efforts. Finally, as the interest in ESG investing broadens across investor groups that have been more reticent to adopt it, as they await more regulatory “air-cover”, it becomes even more incumbent on investment managers to be those sources of education and standard setting, and to be diligent about keeping the clients’ interests as their top priority.
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