CADLE We are starting to look at ESG. The US is behind our counterparts in Europe and perhaps in Australia. For Nationwide, it’s about incorporating it into our credit analysis, particularly with regard to risk factors.

I suspect you will hear us talking about ESG in a more proactive fashion one or two years from now – saying it’s not just about how we incorporate it into our risk analysis but also that we are proactively looking for investments related to ESG guidelines. But, for now, the focus is on how ESG factors influence the credits we’re analysing.

Nationwide is not only a life-insurance company, it’s also a property- and casualty-insurance company. With fires in California, floods in the Midwest and so on, we are very conscious of how environmental events affect our business. I think we are more sensitive to ESG issues within the investment portfolio.

BELLO Voya Investment Management’s corporate policy is leaning towards ESG and we have received several awards as a testament to our corporate focus, particularly on governance.

On the private investment side, the drive towards ESG for us is not so much from our general accounts but from our third-party clients. When it comes to investment-making decisions on behalf of general accounts, we have to report our investments in, or related to, coal to the state of California. Other than this, we do not have codified limits on climate-sensitive sectors. It has not become a part of our fiduciary responsibility as of yet.

Having said this, we take some factors into account – for example, we typically will not invest in long-dated coal transactions in markets where we do not see coal as viable for the long term.

I believe ESG, or a similar metric, will increasingly feed into investment managers’ mandates, at some point in the future. As long as natural disasters, pollution, and other environmental events translate into economic realities such as higher insurance costs and replacement capital expenditures for damaged property and equipment, it is an economic argument, rather than being about a social or green discourse. But, for now, it’s business as usual as far as the general account is concerned.

UNGER It really is a liquidity issue for us. If no-one is doing coal and we’re holding coal, we cannot sell the bonds. We have to mark them down, and it becomes a performance issue. It’s less about buying green bonds and more about protecting ourselves from credit and liquidity risks.

KIM I’m curious to hear from issuers how much pressure there is domestically to deploy more sustainable capital – and whether this is coming from the regulators or the general public.

Also, how do you get the appropriate KPIs associated with doing this? Because there’s a trend for investors and pressure will continue to build from this side. If issuers are demanding bonds based on sustainability, our market will have to start to evolve to look at them. If issuers suddenly need a lot of ESG-type funding, will this drive change?

CROSSLEY We are not just price-focused in relation to ESG. I don’t think companies should issue green bonds just because they get a pricing benefit. It has to be for the right reasons.

From our point of view, there’s no blueprint for how to go forward in Australia. There are so many different formats and ways of reporting and there’s no consensus as to what we should be reporting on. I’m sure we have lots of good green stories within our business and we could easily issue a green bond. But we don’t want to do so until we have made sure we have our own house in order so we can report properly.

In an ideal world, I don’t think there should be anything called a green bond. Perhaps in five years, everything will be green without a specific label.

VAN DER GEEST From my point of view, the emergence of ESG demonstrates the broader governance piece. If an organisation is looking at sustainability and its responsibilities in this area, it is demonstrating sound overall governance practice. This means the company is doing the right thing from a strategy perspective but also as an organisation considering investments in this light.

Sustainability-linked funding products are one side of the equation. The focus should be what the organisation is doing from a strategy point of view.

Melbourne Airport has increased its focus on sustainability. Would we do a funding transaction to lead the agenda internally on this? No – strategy leads financing, not the other way round.

However, when we go to Europe, where there is a focus on ESG, we will be testing our strategy-led story. We will test what European investors require because they are the leaders of the pack and we all need to follow them.

We need consistency across the industry because we can’t have so many different rating providers for the investor and corporate communities. We need to see some convergence and thought leadership in this area.

CROSSLEY We have started to have a lot more conversations, internally and also with banks and others in the industry. I agree that we need our corporate affairs and senior management to be on board with the strategy. It’s not just led from treasury.

TE PAA About 85 per cent of energy generated in New Zealand is renewable. We think it will be quite difficult for us to achieve something labelled green based on our network. But we have a very good story because of how the energy that uses our network is generated.

Our shareholders drive the strategy for climate change and ESG. We have completed the Global Real Estate Sustainability Benchmark (GRESB) survey to compare ourselves. I see the focus on sustainability becoming more important – driven by shareholders and then being a priority for the broader executive management team.

VAN DER GEEST We also do the GRESB survey – it’s across the full governance spectrum, including social issues such as diversity policy and focus on sustainability and the environment. A lot of infrastructure and property assets participate.

CADLE I have seen the rating agencies saying they are starting to incorporate ESG into their ratings analysis. Have issuers seen this and are they taking it into account?

TE PAA I haven’t noticed an increased focus. We did our review in September with S&P Global Ratings (S&P) and there was not a specific focus on ESG.

CROSSLEY We have an annual review from S&P. We were last rated in May 2019 and I asked the agency at the time whether it was doing anything in this space. It said it would be coming soon. I’m expecting a lot more questions this May. I noticed at the conference here in Miami that S&P has sustainability on its banner. It must be looking at this area.