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CASE STUDY: F&C Asset Management

‘Responsible Engagement to Instigate Change’

Relevant Principle: 2.2 Asset Management

Opportunity

Socially responsible investment (SRI) has led the way in demonstrating how environmental, social and corporate governance (ESG) information , including that related to climate change, can be integrated into mainstream investment decisions. There has also been a notable shift to products and services that focus on the opportunities presented by climate change (rather than mitigating risks). If continued the sector can provide key levers for reallocating capital flows to support the transition to the low carbon economy. The challenge for the asset management sector therefore lies in continuing to provide analysts with the tools and training to incorporate climate change into their investment decisions; whilst simultaneously engaging clients and investee companies on Climate Change.

Action

F&C’s Responsible Engagement Overlay (reo®) programme encourages investee companies to adopt better Environmental, Social and Governance (ESG) practices using various techniques, including one-on-one dialogue, voting rights, and participation in collaborative investor networks. The reo® approach can be applied to any equity or corporate bond mandate, irrespective of whether the money is managed by F&C.

Impact

The reo® approach has already had an impact in deforestation and the palm oil sector:

  • Deforestation is estimated to account for 20% of greenhouse gas emissions. F&C alerted investee consumer brand companies, as well as oil palm growers, to expect tighter government policies aimed at curbing deforestation linked to palm oil production. A number of major consumer brands have since led the way by committing to sourcing 100% of palm oil from sustainable, certified sources.
  • Three major consumer brands also recently suspended trading with a palm oil producer due to alleged involvement in tropical rainforest destruction. F&C conducted its own investigatory trip to a plantation in Indonesia, resulting in detailed recommendations to the owner of the palm oil producer for improvements. The owner has since adopted some of these recommendations, including an independent investigation into allegations of poor practice and tighter controls to protect rainforests.