Why engagement works on tackling climate change

St. James’s Place is committed to ensuring investments are used as a force for good. Engagement is a powerful way to maximise our influence over companies and push for change.

Many people are increasingly concerned about global warming and other environmental, social and governance (ESG) issues when it comes to choosing where to put their money. The good news is that investor action on these is increasingly effective. What’s more, St. James’s Place is at the forefront of efforts to tackle key ESG concerns and is ramping up engagement with fund managers and companies to make a positive difference. The essence of this is that, as a shareholder, you own a part of each business you invest in. And companies must keep their shareholders happy, especially if there is strong collective pressure.

With more than £140 billion under management and 830,000 clients, St. James’s Place is able to exert a powerful influence on companies to set environmental targets, such as net-zero carbon emissions, on your behalf. St. James’s Place then makes sure the firms meet these targets through engagement activities such as site visits, investor meetings, setting out recommendations and expectations, and voting at annual general meetings.

Strengthened Approach

St. James’s Place also amplifies this pressure through membership of the Climate Action 100+ group of investors, which manages $54 trillion of assets and engages with 167 top companies to move them towards net zero. Some 52% of these have set a net-zero emissions target so far. St. James’s Place are also members of the Institutional Investors Group on Climate Change (IIGCC).

But there is more to be done. According to ShareAction, other asset managers handling $36 trillion are still neglecting the social and ecological harms of their investments.¹

To further strengthen its approach, St. James’s Place has joined forces with Robeco to engage directly on ESG issues with companies, which will complement fund managers’ existing activities in this area. Robeco has a successful track record in responsible investing, with over 20 years’ experience in engagement. For example, in 2020, it engaged with 222 companies and conducted 941 engagement activities.

“We already talk with fund managers about their approach to investing responsibly a lot,” says Petra Lee, Responsible Investment Consultant at St. James’s Place. “By working with Robeco we can double down our engagement efforts, encouraging companies to do more and act faster. Robeco will help us use our size and scale to make money a force for good.”

The Evidence For Engagement

Engagement is one of the most powerful ways investors can tackle ESG issues – and identify related risks and opportunities to support long-term investment performance. They have seen the success of this approach in changing corporate behaviour over the past decade, and are increasingly raising concerns both publicly and in private meetings.

For example, in May 2021, ShareAction reported that HSBC was committing to phasing out finance for the coal industry by 2030 in the OECD, and 2040 worldwide.2 This came after pressure from a $2.4 trillion group of shareholders. In the same month, Tesco committed to increasing sales of healthier food and drink products after months of engagement with shareholders on the issue.

Engagement has also been effective in encouraging oil companies such as BP and Shell to commit to final and interim net-zero targets.

Why St. James’s Place Chooses Engagement

“Fossil-fuel companies have such a bad reputation that many investors who are concerned about climate change previously avoided them completely”, says Lee. However, she adds, “We chose a different approach.”

“We feel it’s more effective for oil and gas companies to transition their businesses to renewable energy sources than for a start-up to provide all our future energy needs. Start-up companies do not have the necessary access to the capital, experience and infrastructure, that the larger energy producers already possess.” she says. “We want to move forward more collaboratively. We want to encourage and invest in change, rather than just turn away from it, in this way we can be part of the solution.”

St. James’s Place therefore supports a greener world through its rigour in selecting and interviewing fund managers and through its work with Robeco. One key goal is for all of St. James’s Place’s portfolios to be net-zero by 2050 or sooner, with interim targets.

“Environmental and social change is coming,” Lee says. “And we want to be at the forefront. You either embrace it and benefit from the opportunities it creates, or deny it and suffer the consequences. Engagement is the best way to help our clients invest in a world worth living in.”

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Sources:

¹ ShareAction, Point of No Returns, March 2020

² ShareAction, HSBC coal phase-out passes but the battle is not won yet, May 2021