Investing purposefully to address climate change and build a more equitable society
Global Investment Insights
with Suzanne Tavill, Global Head of Responsible Investing, StepStone Group
Suzanne is the Global Head of Responsible Investing at StepStone Group, a global private markets investment firm focused on providing customised investment solutions and advisory and data services to its clients.
StepStone covers the full spectrum of private markets investing, where the greatest inefficiencies and, hence, investment opportunities, are believed to reside. As of December 31, 2020, StepStone oversaw approximately $333 billion of private markets allocations, including $80 billion of assets under management.
The role of Global Head of Responsible Investing encompasses ESG and Impact across all asset classes and investment strategies. Suzanne is focused on working with StepStone’s clients to enable them to deliver private markets investment programs that meet their non-financial goals.
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Suzanne is focused on working with clients to enable them to deliver private markets investment programs that meet their non-financial goals.
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This may involve designing and implementing an investment program that aligns to the Sustainable Development Goals broadly or a specific focus like Climate Change or Diversity & Inclusion. “It is critical that the entire process is considered so that our clients can deliver authentic, intentional outcomes for their stakeholders”, Suzanne highlighted.
She continued, “the mainstream’s focus on ESG / Sustainability / Impact is incredibly exciting. Considering investments across all material dimensions rather than ignoring a raft of non-financial factors because they are deemed irrelevant or too difficult to measure will make for better investment decisions.”
StepStone advocates strongly for this position as expounded in their white paper, “Responsible Investing: Internalizing the Externality”. If mainstream capital is invested purposefully with particular non-financial outcomes in mind, then at the aggregate societal level, there is a chance of shifting sufficient capital flows to address climate change and building a more just and equitable society.
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If mainstream capital is invested purposefully with particular non-financial outcomes in mind, then at the aggregate societal level, we have a chance of shifting sufficient capital flows to address climate change and build a more equitable society.
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However, responsible investing, like any fast-evolving space suffers from a lack of standardisation. This is reflected in the numerous frameworks, standards and interest groups that have emerged. This creates challenges for LPs and GPs alike who are trying to do the best by their stakeholders.
As soon as they have developed a policy or upgraded a process, a new demand is placed upon them. There is no end in sight in this regard; there are so many issues to address and the subject matter is often complex.
“For example, asking GPs and LPs to address climate change requires their embarking on a steep learning curve and committing substantial resources to address this topic deliberately. Fortunately, we have started to see some of these interest groups coming together to align their efforts, notably SASB with GRI, UNPRI with TCFD, and regulation is starting to catch up. It is helpful if GPs and LPs align their activities with peak bodies as this further supports the drive to greater standardisation”, Suzanne explained.
She believes investors that lean in to master the tools of the trade around non-financial issues including climate change will be better positioned than those who ignore how the cost of capital is declining for businesses that are governed with a strong ESG, sustainability mindset versus those that are not. This is evidenced in Europe where the EU Taxonomy is heralding the movement of very large sums of capital out of certain sectors and businesses because they are deemed unsustainable.
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The cost of capital is declining for businesses that are governed with a strong ESG, sustainability mindset versus those that are not.
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Suzanne left us with a recount of her time as a listed equities portfolio manager in London, during 9-11.
“I remember staring in shock at the televisions with my colleagues. The floor went still as the horror unfolded. We could see the tickers turn red, and we knew what stocks to buy in a crisis. The team came together to discuss whether we should trade and concluded that we should not profit from such a horror.
This may seem like an obvious conclusion in retrospect, but at the time no one had full information. Knowing when to walk away from an investment opportunity is often one of the hardest things to do. Walking away on a matter of principle, like we did that day, was undoubtedly the right decision and one that we never regretted, she concluded.
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Knowing when to walk away from an investment opportunity is often one of the hardest things to do.
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Disclaimer
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
The authors, directors or guest writers may have a financial interest as investors, trustees or directors in investments discussed or recommended in this document. It has been assessed by the editors that these financial interests have not had an impact on the material contained here within.
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