The Point

ESG: What Albo’s 43pc emissions target means for investors

Energy security and workplace relations were among the biggest ESG themes in the recent ASX reporting season, says Pendal’s Rajinder Singh.

On the labour front, Rajinder says investors should take a look at a company’s agreements with workers.

“If you’ve got an agreement that’s due for renegotiation in the next 12 months versus one that was signed for five years, that could have a material impact on your forecast growth of your labour costs.”

For energy, security of supply is critical, says Rajinder.

“The other thing that matters for investors is understanding the capital expenditure required to address these issues.

“What’s the capital allocation to these initiatives? And is there an actual measurable benefit for the amount they are planning to spend?”

ESG: Fixed interest investors can make the world better too

Sustainable investors should expect fixed interest managers to engage with bond issuers, just as equity managers do with companies, says Pendal credit ESG analyst Murray Ackman.

Engagement refers to dialogue between investors and investees that seeks to improve policies or public disclosure on social, environmental and governance matters.

But it’s not just for equity investors.

Since large parts of the market are unlisted, fixed interest investors are discovering they have a critical role driving change at some of the world’s most important companies.

“Look at the biggest players in the climate transition — most of the utilities, many of the infrastructure owners — they are not listed entities,” says Murray.

“But they issue debt — so we have access to influence them.”

Pendal’s Income and Fixed Interest team has undertaken 73 engagements so far this year.