Words of Wisdom

The hardest thing about bringing these reports together is to get to the end and realise there were so many wonderful, interesting and insightful comments that didn’t find a place in the body of the report. For that reason, last year we created this ‘Words of Wisdom’ section to deliver some of those ‘missing’ insights. Think of it as the ‘cutting room floor’. We hope you enjoy them.

“There are interesting philosophical questions about whether you try and work from the bottom up (in other words, just try and kill off all the problematic stuff in your portfolio); whether you try and actively shift your portfolio into things that are definitively 'green', or whether you take your existing portfolio and make it as 'green' as it can be or whether, in fact, you do some combination of those three things. Now, those are philosophical questions! With securitisation it's probably not too tricky because, provided what you're doing isn't a problem, it's probably okay and you should actively seek to try and get as much as you can of the stuff which is pushing for good outcomes.”

- Local Investor “Impact is a very valid and important part of the whole ecosystem, but I think there's as much to be done with the greys of the world, as there are with the ultra-greens.”

- Local Investor

“Energy companies using more 'green' energy sources can have huge impacts. But equally, you can have 'green' bonds which are lacking in substance, shall we say. I think the fact that people are being more nuanced in the way that we think about things just massively increases the opportunity set of things that you can look at. “

- Local Investor

“In terms of the mortgage market the ‘S’ and the ‘G’s are just, you know, waking up every day putting your pants on. That's what you do.”

- Local Investor

“Green bond reporting will become more and more of a science, and so you'll find there'll be more and more exposure in that area to environmental finance.”

- Non Bank Issuer “The other thing that also is extremely relevant - again, this comes back to the skews we see – is, on the investor side, there are even less women. I have done a lot of road shows and it is very rare for me to meet women that are representing fund managers, fixed income investors, anyone on that investor side, and often I'll do 20 investor meetings and there'll be one female across all the meetings. So I do think that the gender diversity, maybe in terms of industry as a whole - it may look like there are a lot of women but they're very much skewed to particular products and pockets (say trustees, legal). There are pockets that are very, very under-represented in that space.”

- Non Bank Issuer

“I think my biggest one, to be honest, is the macro trend. You know, think about the macro trend as one of electrification and one of distribution. When you go to distributed assets, you are talking about translating people's OpEx, like paying energy bills, into CapEx, i.e. buying solar and that, if we just take the solar market for example, is accelerating. If you could go back 10-or-so years, Australia was putting 120,000 of those things on the roofs and now we’re in the 300,000s, and the rate is sort of increasing. So there is what I would call an OpEx to CapEx trend.”

- Non Bank Issuer

“There's a lot of fads at the moment, but are you as an enterprise being sustainable or are you just taking advantage of particular definitions or window dressing to access funding cheap? Investors and investment committees are wise to this now and they're saying, well, we would like your assets to be sustainable and we'd like your corporate activities to be the same.”

- Non Bank Issuer

“Everybody is collecting data and everybody knows that it’s a very rich source of information. The collecting is one thing, but you’ve got to be able to use it properly. I think analysis is more important. Yes, I think it is changing the way some companies are approaching things.”

- Non Bank Issuer

“There is a real concern around, obviously, climate but also the broader issue of ESG. Europeans are ahead of the game in terms of thinking about all three areas. Their culture of ESG has been pretty well embraced, but more than embraced – it's now being embedded in law. So it’s not just voluntary disclosure. It’s mandatory.”

- Service Provider “The evidence shows that companies that adopt an ESG risk management strategy generally do better than those that don't. So the opportunity is for better returns over the longer term. That’s the theory. So, by implementing a good ESG risk management framework, basically, it’s the opportunity to execute a lot better returns over the longerterm.”

In the future, if you saw a deal that didn’t have sustainable loans in them or could not be certified by a rating agency and the loans do not meet the standard they’ll stand out and you’ll go, “Why are we investing in this?”

- Service Provider

“For a company or a government, if what the community and customers are saying, or their investors are saying, look, we're not going to deal with companies that are dealing in coal or have problems with human rights in their supply chains, it affects either the sellers to their customers or to their workers, who don't want to work for them, or the investors invest in them. That is all encompassed in their social license and I think that's what's driving this.”

- Service Provider “I have very strong confidence sustainability will have an impact, just seeing the tide of interest and anticipation in it. It’s become very real in Europe. A lot of the flooding we have had in Europe has affected peoples view of the impact of climate change and sustainability and its affecting every aspect of home and work life. I’m confident that the changes institutions are making, regulators are pushing for and governments are pushing for will make the real life of individuals and companies better as a result.”

- Global Investor

“This focus on sustainability is something that people will always look at. There are so many people worried about the environment and what we all do with our environment. There are so many people that are concerned about how their money might be impacting other people in society. They want to speak with the power of their pockets. It's similar to social media. People recognise they have a power in numbers and voice and I think now they believe they have a power in their money too, even if it's small amounts. If there's a lot of people that believe that they can, they can make a difference.”

- Service Provider