As Public Attitudes Toward the Environment Change, So Should the Investment Approach

In the 16 years since the Principles for Responsible Investment (PRI) were first unveiled there’s been a sea change in awareness and concern for the environment among the general public. But that hasn’t necessarily been reflected in the asset management world. Recently returned from the annual PRI in Person Conference in San Francisco, Franklin Templeton’s Head of European Fixed Income, David Zahn, detects an appetite for change among investors and investment managers.

After attending this year’s Principles for Responsible Investment Conference (PRI) in San Francisco―close to Franklin Templeton’s San Mateo headquarters—our takeaway message is clear: Investors and investment managers have to be proactive in addressing changing public attitudes toward the environment.

Unsurprisingly, with the conference taking place as Hurricane Florence was bearing down on the US East Coast, climate risk was high on the agenda for many delegates and there was much discussion of how investors assess and manage environment, social and governance (ESG) factors.

We believe the most important force for addressing environmental and social concerns may be the way we invest. In our view, that’s even more influential than the efforts of nongovernmental organizations or intergovernmental accords.

So, it was sobering to learn that on a show of hands, only around 10% of the audience at the conference identified themselves as portfolio managers or investment risk-takers.

That low percentage suggests to us integration of ESG processes is not what it could be across the asset-management industry.

Several speakers at the conference highlighted the importance of integrating ESG processes rather than treating ESG as a separate discipline.

An Integrated Approach to ESG

At Franklin Templeton, we are working to make ESG considerations an inherent part of how we evaluate sectors and future business opportunities.