Roshni works as a portfolio manager with the Pendal Global Emerging Markets Opportunities strategy. She is based in our London office with affiliate fund manager J O Hambro. Prior to joining JOHCM, Roshni worked for Kintbury Capital for two years as an investment aAnalyst. Prior to this, Roshni spent four years at JOHCM as an analyst on the UK Opportunities fund. Roshni holds a degree in Economics from the London School of Economics and is a CFA Charterholder.

Investors who want to make a difference in the world have far more potent weapons at their disposal than merely selling their shares.

• Screening strategies not enough to drive change
• Investors need a new approach – hold and vote
• Exxon Mobil defeat a clarion call for shareholder power

THIS YEAR’s stunning defeat of Exxon Mobil by Engine No.1, a tiny activist fund that resulted in three new directors on the board of one of the world’s largest fossil fuel companies, is the most public example of the rise of a new type of shareholder engagement.

It is expected to accelerate a dawning realisation among investors that when it comes to public equity markets, there are stronger avenues for change than traditional methods of screening and divesting companies.

If every climate-minded investor sold their coal shares, that would leave control of those companies in the hands of the least climate-minded owners.

Susheela Peres da Costa

“But while there are good reasons for an investor to not want to be exposed to fossil fuel assets, it’s another thing altogether to assume a company cares who owns its shares.

“It’s worse than having no impact because it makes for a false sense of security.

“Even if every climate-minded investor sold their coal shares, that would leave control of those companies in the hands of the least climate-minded owners.”

Regnan’s work suggests investors who want to make a difference in the world have far more potent weapons at their disposal than merely selling their shares.

Stewardship initiatives, in which institutions use their investor influence for change, are proving to be a powerful lever.
Investor stewardship can also be successful putting resolutions to boards and reigning in unhelpful corporate influence on government policy.

Advocacy is an area where coalitions of smaller investors can have a real effect, directly asking regulators, industry bodies and governments for change.

And investing in disruption to drive change is also an effective strategy.

But what about small investors without access to these avenues?

“Figure out where your power really is,” says Peres da Costa. “Unless you are an enormous institution, big enough to move market prices, you have much more power as a consumer – what products and services you buy, who from, and whether you are vocal about why.

“So, you say ‘I don’t want my shares ever to be voted in favour of a director who is trying to entrench fossil fuels in the economy’. And you check which financial service providers commit to that before you entrust them with your money.

Peres da Costa points out that this simplifies many of the challenges associated with trying to invest responsibly, by focussing the discussion on what kind of impact investors want to have.

“It’s too easy to get caught up in details when you focus on divestment, or ‘screening’,” Peres da Costa says.

“For instance, should divestment focus on companies that produce fossil fuels? Or firms that burn them, releasing global warming gases into the atmosphere? Are firms that support the fossil fuel supply chain in or out? Coal ports? Gas pipelines? Roadside retailers of petrol?

“Burning fossil fuels is a major part of industries as diverse as energy generation, steelmaking and aviation. Many of the largest organisations involved in fossil fuels are governments; are we divesting airlines and countries too?

“Are all carbon emissions equal? Is coal burnt to make steel for wind turbines worse than lower-carbon oil to air-freight fresh tropical fruit to temperate markets?

“These are often interesting debate topics, but dodge the deeper question most clients are interested in addressing: What does my money do?”

Read more about what investors can do to drive change at The Divestment Dilemma.

About Susheela Peres da Costa

Susheela is Regnan’s head of advisory. She has more than 15 years of domestic and international experience advising institutional investors on responsible investment.

As Head of Advisory, she has assisted small foundations through to the world’s largest institutions, including a successful 18-month project in Switzerland responsible investment leadership for a global full-service bank and strategic advice to the UN-backed Principles for Responsible Investment on upgrading stewardship.

Susheela chairs the Responsible Investment Association of Australasia and is special adviser to the co-chair of the Australian Sustainable Finance Initiative.

About Regnan

Regnan is a responsible investment leader with a long and proud history of providing insight and advice to investors with an interest in long-term, broad-based or values-aligned performance.

Building on that expertise, in 2019 Regnan expanded into responsible investment funds management, backed by the considerable resources of Pendal Group.

Regnan Global Equity Impact Solutions Fund invests in mission-driven companies we believe are well placed to solve the world’s biggest problems, while the Regnan Credit Impact Trust (available in Australia only) invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change.

Visit Regnan.com

Find out about Regnan Global Equity Impact Solutions Fund

Find out about Regnan Credit Impact Trust

For more information on these and other responsible investing strategies, contact Head of Regnan and Responsible Investment Distribution Jeremy Dean at jeremy.dean@regnan.com.

Pendal’s Sustainable Australian Fixed Interest Fund invests in social bonds that help vulnerable Australians while also aiming to generate strong returns. This is the story of a family helped by Hume Community Housing, which is financed by those social bonds.

Rudy and Judith knew early on that something was different about their twins Steven and Kerry.

When they first took them to the doctor at 12 months of age, they still hadn’t shown any sign of trying to walk or stand up.

“I knew something was wrong,” says Judith.

Steven and Kerry had cerebral palsy: a permanent movement disorder that robs sufferers of the ability to live a normal life. It often requires constant, sometimes lifelong care — usually delivered by loving family members at considerable personal sacrifice.

“Steven and Kerry’s parents have done everything for them for 60 odd years and asked for nothing – asked for no help whatsoever,” says Angela, a direct care worker for the Cerebral Palsy Alliance.

As the years went on, Rudy had to retire early because it was getting too difficult for Judith to take care of Steven and Kerry on her own.

“I was 80 and Rudy was 83 – we knew we had to do something,” says Judith.

Heart-wrenching separation

The idea of being separated from the pair was heartwrenching.

The first time Judith took the twins to respite she admits she “cried her eyes out – it was hard to let go”.

But they knew they had to prepare for the future. It was most important that the twins could be looked after in comfortable accommodation built by someone they could rely on.

More than anything Rudy and Judith wanted the twins to be kept together when they could no longer look after them, Angela says.

Angela, who has been a carer for Steven and Kerry for about 15 years, put the family in touch with Hume Community Housing.

Social bonds help vulnerable Australians

Hume is a Tier 1 Community Housing Provider (CHP) which develops affordable housing for vulnerable or low-income Australians with help from investors in Pendal’s Sustainable Australian Fixed Interest Fund.

Hume is well-known for its expertise in developing and managing Specialist Disability Accommodation that caters for extreme functional impairment or very high-support needs.

Hume’s funding comes partly from the federal government’s National Housing Finance and Investment Corporation (NHFIC), which raises money by issuing social bonds to investors such as Pendal.

NHFIC lends out the money raised (more than $2 billion so far) to CHPs at lower interest rates and on better terms than banks — while providing attractive returns to investors.

“NHFIC is very important for financing, because it’s possibly as low a cost for borrowing you could ever achieve,” says Wendy Hayhurst, chief executive of the Community Housing Industry Association.

“And it’s performed very well because it’s got a government guarantee.”

A new home for Steven and Kerry

With help from Angela the twins moved into a Specialist Disability Accommodation property purpose-designed by Hume to meet their high-support needs.

The Cerebral Palsy Alliance worked closely with Hume to ensure the fit-out was purpose-built for the twins’ evolving needs and staffed with familiar faces.

After walking through the Hume property in south-west Sydney – perfectly designed for wheelchair use and built to platinum-level Livable Housing Design Guidelines – Judith felt comfortable with the decision.

But it was still hard to let them go.

“I knew it would be hard to let go of my children,” says Judith.  “I thought they’d be lost without me. I was certainly lost without them.”

“[But] I couldn’t be happier. It was perfect for the twins. It kept them together.”

Rudy and Judith could live peacefully knowing the twins were well looked after in “such a lovely place” close to their own home.

After decades of sacrifice, they have also been finally able to do something they have never done before – enjoy a holiday on their own – something Judith admits “they never would have considered if the twins were still at home”.

Pendal thanks Hume Community Housing for their co-operation in producing this article. Hume is a Community Housing Provider with more than 30 years experience in providing homes and services to more than 9000 customers in NSW. For more information go to www.humehousing.com.au