The emerging world of environmental, social and governance ( ESG ) investing was the focus of an Out in Finance panel discussion Jan. 23 at Legal & General Investment Management America's ( LGIMA's ) Chicago headquarters.
Founded in 2019, Out in Finance is a Chicago-based financial services industry organization focused on LGBTQ inclusion and equality. Among Out in Finance's goals are advancement of LGBTQ-friendly workplace policies, event collaboration with financial firms and community engagement.
Out in Finance Programming Committee Co-chair Duggan Everage was the event moderator. Panelists included LGIMA US Stewardship and Sustainable Investments Head John Hoeppner, MSCI Chicago-based ESG Client Coverage Vice President Chris Knowland and Impact Engine Private Equity Managing Partner Priya Parrish.
Ahead of the discussion, LGIMA CEO Aaron Meder told the approximately 100 attendees that the company is one of the largest asset managers in the world and ESG investing and diversity and inclusion efforts are its top priorities.
Knowland said 2019 was a breakout year for this kind of investing, adding that at MSCI there are about 200 people on the ESG research team globally and one of their tasks is to look at the good things companies do in this arena.
According to Hoeppner, LGIMA stitches the ESG concept together with a "three broad buckets framework"—integration, stewardship and solutions. In terms of integration, Hoeppner said it is taking new data and making different buy/sell decisions, while stewardship means how one uses their investments to change the market.
Parrish spoke about how coming out of the closet as a queer person opened her eyes to the social injustices happening in the world. This led Parrish to ask why one cannot take the for-profit business models and apply it to social issues because non-profits are often inefficient and the government "trips all over itself."
"The difference between impact investing [which I am focused on] and ESG's is there is an explicit objective that you are trying to generate a measurable, enduring social outcome and a financial return," said Parrish.
Everage asked if there were any examples of a company that had an issue that investors helped to change for the better.
Parrish said that shareholder proposals beginning in 1992 led Cracker Barrel to become a more LGBTQ-inclusive company for both employees and customers.
In terms of the lack of data on LGBTQ people under the ESG umbrella, Knowland said that while there are percentage targets for gender and racial diversity within companies that is not true when it comes to sexual orientation and gender identity.
Hoeppner said that even if the LGBTQ data was out there it might not be used.
The questions Hoppner posed were "How do you tie human rights of a corporation to long-term value creation?," "What is the narrative?" and "Is it around brand reputation or productivity or risk management?"
Hoeppner used Amazon as an example of a company with many human- rights violations and said that on the investment side his question is what data does he want to see in order to push them to do better—adding that, right now, that is not clear.
He also spoke about how LGIMA has rolled out a climate-impact pledge that looks at a company's climate risk. It turned out that Kroger was a "poor player" because they did not have a deforestation policy for their suppliers; however, when it was brought to its attention, the policy changed.
A Q&A session followed.
See OutInFinance.org .
