Coal Pension Trustees, one of the largest pension schemes in the UK, has been a pioneer in China capital market investment. Mark Walker, Chief Investment Officer of Coal Pension Trustees, talked about their ESG policy in China manager selection.
6 July 2020
Coal Pension Trustees, with an invested asset value of GBP 20 billion, is one of the largest pension schemes in the UK. Despite the pensioners were supported by fossil fuel industries in the past, ESG is getting higher and higher up the agenda, especially climate change and employee rights. Coal Pension Trustees has been a pioneer and leader in China market investment, with allocation to China private equity, off-share listed equity and recently China A shares, all through external managers.
Coal Pension Trustees共有200亿英镑投资资产，是英国最大的养老金计划之一。尽管该养老金的成员在过去收益于化石燃料类行业的发展，但该养老金对ESG的重视却与日俱增，尤其是气候变化和员工权利的保障。Coal Pension Trustees是投资中国市场的先行者和领导者，其在中国的投资包含私人股权、离岸中国股票，以及最近的中国A股，所有的投资都通过外部管理人完成。
What’s the ESG investment policy of Coal Pension Trustees? What do they expect from Chinese asset managers on ESG investing? What suggestions will they give to Chinese asset managers on ESG issues? ATC Initiative interviewed Mark Walker, Chief Investment Officer of Coal Pension Schemes.
Coal Pension Trustees的ESG投资政策是什么？他们对中国资产管理公司的ESG投资上有何期待？在ESG问题上，他们将对中国资产管理人提出怎样的建议？ ATC Initiative采访了Coal Pension Trustees的首席投资官Mark Walker来分享他的观点。
“ESG is getting higher and higher up the agenda. My members used to work underground, … despite their support clearly of fossil fuel industry in the past, but they still want to know what we are doing on climate change, particularly they want to know what we are doing in terms of supporting employee rights and those sorts of things.
Other interviews in our ViewPoints Series
Q: Could you please briefly introduce British Coal Pension and your investment in China market?
您能否简要介绍一下 Coal Pension Trustees 以及您在中国市场的投资？
- Our official name is The Coal Pension Trustees. Our pensioners are from British coal mine industry which disappeared 25 years ago;
- We have two pension schemes with a total value of GBP 20 billion (USD 25 billion). We have a risk-seeking allocation partly due to the government guarantee. And the schemes have to turn the GBP 20 billion asset into GBP 40 billion future pension payment in the next 50-60 years;
- For the investment in China, we started with private equity numbers of years ago, and then HK listed stocks. Last year we appointed two external asset managers to invest in China onshore A-shares;
- The total amount of China exposure is between 3.5%-5.5% of the value of our total assets.
- 我们的官方名称是Coal Pension Trustees。我们的退休人员来自25年前退出历史舞台的英国煤矿业；
Q: What is your responsible investment /ESG investment policy generally?
There are four elements of ESG policy:
- Sustainable investment belief: ESG impacts on financial return and risk;
- Sustainable development goals and four strategic considerations, one of which is just transition to low carbon economy ;
- We invest through external managers so we require our external managers to integrate ESG factors in their investment;
- Stewardship is important: we require mangers to engage with portfolio companies while we also engage with invested companies directly through voting policies.
Q: What is the difference between developed market and emerging market when applying ESG policy, especially in China?
- There are clear differences between the developed market and emerging market on the ESG standards, policies, regulatory requirements and government interventions;
- A higher return is needed to compensate the “weaker” ESG standards;
- In China, elements about ESG may not the same with elsewhere, but the growth rate can be expected to more than compensate for the risks from ESG factors, and ESG factors are expected to be improved in China.
- 需要更高的回报以补偿“较弱的” ESG标准；
- 在中国， ESG的相关要素可能与其他地方不同，但可以预见其增长速度将足以弥补ESG因素带来的风险，我们也期望中国的ESG因素可以得到改善。
Q: What do you look for in an emerging market manager that can demonstrate their ESG capability (organization structure, dedicated ESG team, written policies and procedures, etc)?
- Look for the same thing in all external managers but take practical approaches and have a different expectation in different areas;
- At the big picture level, we look at company culture, leadership, commitment to behaviour as long-term investors, etc. To me, these are particularly important;
- At the detail level, as you can expect in a typical RFP, investors look for resource, team, processes that the manager has devoted to ESG.
“If you, as a firm in mainland China, can take a competitive stance, and get an advantage in this area, I think it will go down very well with many fund selectors around the world.
Q: What level of engagement would you require a Chinese manager to have with their portfolio companies on ESG issue?
- We manage engagement both by outsourcing to Hermes Equity Ownership Services and relying on asset managers themselves;
- We hope both the third party and asset managers when they engage with the portfolio companies can drive a positive change not only to increase the return but also to help the businesses themselves to see focusing on ESG is quite a good thing to do.
- 在参与被投企业ESG事务上，我们一方面将主要工作外包给Hermes Equity Ownership Services，同时也依靠资产管理人本身与其被投企业的互动；
Q: How would you expect a Chinese manager to report to you their ESG practice?
- Consistent standards would not be expected across the asset managers in the world;
- We expect the reporting from all managers to have certain criteria including climate and align with our strategic considerations. And we hope to see the evidence that ESG has impacted investment decision-making process and the engaged company has changed the policy for the better.
- Data availability, consistency about the data and the ability to report the in a timely way is still a challenge in the industry worldwide.
Q: Do you have any suggestions for Chinese asset managers on ESG investing?
- ESG is getting higher and higher up the agenda;
- The ESG selection criteria set by fund selectors, would be not just “box-ticking” but ESG integration process focused;
- If the firm in mainland China can take a competitive stance and get advantages in this area, that would make them stand out fund selectors around the world.
View the full interview video