Qontigo’s annual Investment Intelligence Summit was held on-line on Dec. 9. The theme this year was sustainable investing, a ubiquitous topic that has been propelled to centerstage by the extraordinary events of 2020.
Sebastian Ceria, Qontigo chief executive officer, opened the event and acknowledged the extent to which sustainability has become paramount in the new investment landscape. Qontigo was born to combine analytics with indexing and support the ‘new passive’ of targeted exposures, an ambition that must now include environmental, social and governance (ESG) criteria as an additional conductor, he said.
“Now more than ever, the idea of incorporating sustainability in an intelligent way as part of the portfolio construction process and as part of getting those targeted exposures has become completely crucial,” Ceria said.
Qontigo’s CEO predicted sustainability will become a third pillar of portfolio performance, sitting next to risk and returns.
“The efficiency frontier will now evolve to incorporate sustainability as a key third dimension,” said Ceria. “That means that we want to optimize around sustainability too.”
This reality is captured in Qontigo’s new tagline – ‘Optimizing Impact.’ The phrase reflects the overarching objective across Qontigo’s products and solutions, as well as the ethos guiding the company’s culture.
Regulation, ESG reporting, central banks
The Summit counted on a strong line-up of experts from the investment industry, regulators and practitioners. We’ll visit some of those presentations in more detail in coming days.
The first panel brought a discussion among seasoned speakers from Meridiam, APG and the Principles for Responsible Investment that touched upon current key developments in Europe. Among them: the evolution of regulation and creation of a ‘green taxonomy,’ the changing notion of fiduciary duty, and initiatives to standardize corporate non-financial reporting and to measure the materiality of sustainability-related factors.
While everyone in the panel welcomed the various legislative proposals to integrate sustainability into investments, they also highlighted the pending need to harmonize non-financial disclosure. The panel argued that asset owners and investors need clear underlying ESG data, as opposed to ratings and scores, to avoid relativity and greenwashing. There were plenty of interesting viewpoints from the region that’s leading change in sustainable investments.
A second presentation, from the Banque de France’s Bertille Delaveau, provided the policymakers’ perspective and an update on the role of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The involvement and work of central banks are indicative of how, five years after the signing of the Paris Agreement, climate change has become a topic of systemic importance for economies and their guardians.
The practitioners’ view
Nicolas Fragneau at Amundi walked the audience through the first-ever fund carrying a European Union climate benchmark-aligned strategy. The fund was launched as a mandate from 12 leading investment firms and is one of the clearest examples to date of how regulation is driving capital towards a carbon-neutral economy. Qontigo’s STOXX index unit is a proud partner in this project by providing the underlying EURO iSTOXX® Ambition Climat PAB Index, part of the STOXX Paris-Aligned Benchmark Indices (PAB) family.
Gert-Jan Sikking from PGGM and Jennifer Coulson from the British Columbia Investment Management Corporation (BCI) took their spots to dig deeper into the workings of the SDI AOP and the ambitious goal of aligning investments with the United Nations’ Sustainable Development Goals (SDGs).
Christine Heyde and Zubin Ramdarshan from Eurex discussed the new generation of ESG derivatives and why more European investors are turning to these products. Over 1 million ESG contracts have exchanged hands on the European exchange.
Next, the World Bank’s Katya Gratcheva gave an exclusive insight into a new study from the international lender that examines the current state of ESG ratings in sovereign bonds. Gratcheva discussed the need to draw a new type of ESG scoring that, among other things, removes long-term views and ingrained biases so that low-income sovereign borrowers are not at a disadvantage.
Sarah Peasey, Head of Responsible Investment Strategy at Legal & General Investment Management (LGIM), and Maria Lombardo, Invesco’s Head of ESG Client Strategies for EMEA, presented next. Both discussed the practical applications of climate change, risk and opportunities into investments through models and approaches employed by their global investment firms.
In a breakout session, Jay Eisenhardt and Manan Mehta from Northern Trust Asset Management led a compelling presentation about how investors can generate income and manage risk sustainably at the same time.
Finally, Olivier d’Assier, from Qontigo’s Applied Research team, presented a practical study that shows that an early but gradual transition can dramatically reduce the market impact and costs of moving to a climate-aware portfolio. His whitepaper is available here.
A shifting landscape
Overall, the Summit offered an enlightening and thought-provoking debate around a topic that will undoubtedly continue to influence the investment landscape in coming years. Please visit this blog in coming days as we report further on the event’s keynote presentations.
To access a recording of the event, please click here.
1 D’Assier, O., Au-Yeung, J, ‘Climate Impact Investing Is Coming On Fast…,’ Qontigo, December 2020.