Recap: Accelerating Innovation in ESG Investing

This year IEN partnered with Bloomberg LP and the ICMA Centre at the University of Reading’s Henley Business School, to foster engagement and knowledge exchange on sustainable, responsible and impact investment between academics and practitioners. Together we designed a day of panels and discussions to bridge emerging academic as well as applied approaches to ESG integration and sustainable investment. Nearly 100 attendees representing asset owners, investment managers, investment consultants, and academics gathered at the June 13 event, "Accelerating Innovations in ESG Investing," hosted by Bloomberg LP.

An overview of recent academic research on the performance of strategies integrating ESG or sustainability factors was provided Dr. Andreas Hoepner, Associate Professor of Finance at the ICMA Centre of Henley Business School, during The State of Academic Research: ESG integration in Equities and Fixed Income session. The session also provided insights into how non-financial data such as signals from social media and markets can be used to help integrates ESG factors into investment approaches.  Hoepner highlighted that corporations with better ESG ratings are found to have lower cost of debt and higher credit ratings. From a portfolio perspective, ESG portfolios can have reduced downside volatility, according to study by Hoepner and others.

The Keynote, Curtis Ravenel, Global Head, Sustainable Business and Finance Group, Bloomberg LP, discussed the formation of a key global development to improve climate-related financial disclosure.  Ravenel explained how and why the Financial Stability Board (FSB), an international body that monitors the global financial system, recognized climate change risks to the financial sector.  He provided insight into the formation of the FSB Task Force on Climate-related Financial Disclosures (TCFD), led by Mike Bloomberg, and the TCFD’s work to develop recommendations for voluntary climate-related financial disclosures by companies. 

Ravenel was interviewed by IEN’s Sonal Mahida for a discussion on the financial implications of climate risk, drivers including stranded asset theories, the challenges of creating a global approach to address the issue for the financial sector and parallel industry efforts. 

Sector materiality and relevance are increasingly acknowledged as critical elements of effective ESG integration into the investment process, as is the need to understand financial impacts of “extra-financial” factors. The moderated conversation, Debate: Are data and reporting frameworks driving investment strategies? with Michael Kinstlick, SASB, and Mary O’Malley of Prudential provided a lively conversation on the goals, conflicts difference, the company perspective on the issues and concerns usefulness of these frameworks and the goals of SASB. The panel discussed around comparability, varying remits based on different stakeholder audiences and goals of ESG reporting.

Financial innovation for sustainable and impact investing is in early stages. Mission driven investors are interested in this emerging investable frontier but are still educating themselves on current opportunities and their potential. The Financial Innovation: Developing the Opportunity Side panel discussed emerging opportunities and recent innovations in structured finance, including land conservation through green bonds, energy efficiency securitization, and development finance institutional investments in affordable housing in upcoming markets. The panel discussed how these vehicles can be created and leveraged, investment gaps and challenges, potential opportunities, and their growing pains (pipeline, deal sourcing, replication, hybrid finance, capital stacks, intersection of philanthropy and investments).

We were honored to have preeminent researchers and academics present during the Infrastructure, Investment Platforms and the Transition to a Low Carbon Economy session.  Patrick Bolton, the Barbara and David Zalaznick Professor of Business at Columbia University and President of the American Finance Association, presented an overview of his paper,  Infrastructure Investment Platforms: From Global Savings Glut to Financing Infrastructure. Bolton provided a current context for infrastructure investment and shared a new model for development banks as infrastructure investment platforms. 

Waide Warner, Senior Fellow and Lecturer on Law at Harvard University and Senior Counsel at Davis Polk & Wardwell, presented on his research into the development of a sustainable infrastructure investment platform to engage pension funds and foundations in the financing of infrastructure projects with environmental and social benefits. He discussed how successful infrastructure projects can benefit communities and create value for investors.  David Wood, Director, Initiative for Responsible Investment at Hauser Institute for Civil Society and Adjunct Lecturer, Kennedy School of Government, Harvard University discussed how these concepts have been applied in his work on community finance with foundations.

Future of Human Capital Data Panel explored opportunities to gain insights into corporate management of human capital as well as the importance of doing so from an investor perspective. Michelle Miller presented on the data available to investors via coworker.org an online platform for workers. Providing the ESG Research firm perspective, Darragh Gallant presented Sustainalytics approach to the data. Scott Zdradzil, from the New York City Comptrollers’ Office, discussed the importance of corporate management of human capital for long-term and institutional investors. 

The event closed with an evening reception which launched the New York Chapter of “Building A Sustainable Investment Community” (BASIC).