WEBVTT - Inside the RFP - Expectations for Asset Managers 0:00:00.640 --> 0:00:04.080 ESG is constantly evolving. Over the years. It is shifted 0:00:04.120 --> 0:00:09.120 from socially responsible investing to impact to sustainable finance. While 0:00:09.160 --> 0:00:12.680 the terminology continues to change, what hasn't changed are the 0:00:12.800 --> 0:00:17.759 underlying science market pressures, tangible physical and financial impacts of 0:00:17.800 --> 0:00:22.079 the climate crisis, as well as increasing regulatory scrutiny and 0:00:22.200 --> 0:00:26.160 rising consumer expectations. We aim to filter out the noise 0:00:26.239 --> 0:00:29.880 by speaking with industry experts to identify what is really 0:00:30.040 --> 0:00:34.080 driving value. Welcome to ESG Currents, brought to you by 0:00:34.240 --> 0:00:35.480 Bloomberg Intelligence. 0:00:38.560 --> 0:00:42.720 Welcome everyone. I'm Shahin Contractor, Senior ESG analyst NYO, who's 0:00:42.760 --> 0:00:46.839 for today's episode? Today I'm joined by Sarka Gul, Global 0:00:46.880 --> 0:00:51.680 head of Sustainable Investment Manager Research at Mercer. Sarka sits 0:00:51.680 --> 0:00:55.280 at the intersection of ACET owners and mansus with a 0:00:55.440 --> 0:01:00.000 front row view into how sustainability expectations are being implemented, 0:01:00.080 --> 0:01:03.560 did in mandates and in out of pace. So today 0:01:03.640 --> 0:01:07.640 we're going to explore what's actually changing in investment mandates 0:01:07.680 --> 0:01:12.280 beyond just the ESG rhetoric, how requirements are evolving, where 0:01:12.319 --> 0:01:16.240 expectations are tightening or selfening, and how ACID managers are 0:01:16.280 --> 0:01:22.000 adapting their strategies, processes and portfolios. In response Saraca welcome, Hi, 0:01:22.120 --> 0:01:24.800 great to be here, of course, as sosartica. To kick 0:01:24.840 --> 0:01:28.120 things off, maybe the first question is from your vantage 0:01:28.160 --> 0:01:32.320 point at MERCLE, what's the most noticeable change you've seen 0:01:32.520 --> 0:01:36.520 in how ACID managers are receiving mandates or out of 0:01:36.560 --> 0:01:40.720 peace over the past twelve to fourteen months Kiven, all 0:01:40.720 --> 0:01:42.920 the stuffs happening within our world. 0:01:43.920 --> 0:01:48.080 Yeah, thanks, I guess from my perspective, the most notable change, 0:01:48.480 --> 0:01:51.840 noticeable change has really been that asset managers are increasingly 0:01:52.040 --> 0:01:56.680 receiving more sort of tightly defined or proof based rfpies 0:01:56.880 --> 0:02:00.520 that are framed around the implementation and clear outcomes than 0:02:00.760 --> 0:02:05.840 just really thinking or asking about broad ESG narratives. So 0:02:05.880 --> 0:02:10.079 in practice this potentially shows up as less generic ESG 0:02:10.240 --> 0:02:16.120 policy language, more mandate specific requirements, so clear definitions, constraints 0:02:16.360 --> 0:02:19.160 what counts in the strategy and that could be around 0:02:19.160 --> 0:02:23.919 specific topics. There are higher expectations around evidence, So give 0:02:24.040 --> 0:02:27.520 examples of how a process is put to practice. What 0:02:27.560 --> 0:02:31.600 are those investment decisions specifically around sustainability, What are some 0:02:31.680 --> 0:02:35.840 of the data aspects and how do you think about 0:02:36.600 --> 0:02:41.280 and measure sort of sustainable outcomes, So really the focus 0:02:41.320 --> 0:02:46.119 is on reducing some of that greenwashing risks. And then 0:02:46.280 --> 0:02:50.640 again more modular mandates, so clients are thinking about sustainability 0:02:50.639 --> 0:02:54.040 objectives into specific sleeves. So rather than just a broad 0:02:55.360 --> 0:02:59.360 expanse of ESG language across every mandate they are, they're 0:02:59.360 --> 0:03:02.560 focusing on specific themes and such. 0:03:02.919 --> 0:03:05.919 Okay, so I like that as moving in a less 0:03:06.000 --> 0:03:09.800 generic I think, to your point, more evidence based. I 0:03:09.840 --> 0:03:13.440 guess you know, one thing that I see is the 0:03:13.639 --> 0:03:17.240 shift in language, and you know, moving towards soft I 0:03:17.280 --> 0:03:20.520 want to call it softer labels, things like you know, 0:03:20.600 --> 0:03:22.799 resilience or I don't know, you even know what you 0:03:22.840 --> 0:03:25.360 want to call it these days. Is that something you're 0:03:25.400 --> 0:03:29.040 seeing as well? Or is this still very much defined 0:03:29.160 --> 0:03:32.880 as sustainability or ESG or these these storms that we've 0:03:32.880 --> 0:03:34.359 always seen in the past. 0:03:34.680 --> 0:03:37.839 Well, I mean you've just you've just stated to very 0:03:38.040 --> 0:03:41.280 very broad terms and so yes, it does. It does 0:03:41.400 --> 0:03:46.119 create uh, you know, confusion at times, and so really 0:03:46.160 --> 0:03:49.080 asset owners are assessing what they are aiming to achieve 0:03:49.520 --> 0:03:52.640 and then potentially moving away from language that could could 0:03:52.640 --> 0:03:57.120 be inconsistently defined globally. So what does replace it? Is 0:03:57.120 --> 0:04:02.160 is potentially universal or more financially grounded terminology I mean 0:04:02.320 --> 0:04:06.520 broadly speaking, ESG. You'll see that as being referenced less 0:04:06.520 --> 0:04:10.240 directly and instead it will be positioned as resilience. But 0:04:10.360 --> 0:04:14.600 what does that resilience mean? And this is in financial terminology, 0:04:14.680 --> 0:04:20.120 so looking for financially material aspects like transition risk, physical risk, 0:04:20.279 --> 0:04:23.279 regulatory risk, you know, supply chain things like that. So 0:04:23.360 --> 0:04:27.039 it becomes quite specific and therefore the questions then, you know, 0:04:27.160 --> 0:04:29.599 shift from do you have a policy or how do 0:04:29.640 --> 0:04:31.599 you think about this? To you show me how these 0:04:31.680 --> 0:04:35.720 risks are being identified and managed in the investment process. 0:04:36.400 --> 0:04:39.120 You know, there are other terms that you know that 0:04:39.200 --> 0:04:42.960 managers are no longer using, so diversity, equity, and inclusion. 0:04:43.160 --> 0:04:46.440 You know, the underlying intent often remains, but the language 0:04:46.520 --> 0:04:50.440 does tend to center on terms like culture or inclusion 0:04:50.640 --> 0:04:53.880 or belonging, so it becomes a lot more granular in 0:04:54.000 --> 0:04:56.840 terms of what they're trying to define rather than an 0:04:56.960 --> 0:04:59.080 umbrella term of DEI. 0:04:59.200 --> 0:05:03.160 I see and I guess so you coverle You know 0:05:03.200 --> 0:05:06.400 this this field from a global lens, So are you 0:05:06.520 --> 0:05:11.160 seeing differences in a sort of global expectations in case 0:05:11.240 --> 0:05:14.240 of how these mandates are written, for example, as Europe 0:05:14.279 --> 0:05:18.440 doming things differently than Asia versus the US, any trends 0:05:18.480 --> 0:05:19.280 over there. 0:05:19.279 --> 0:05:22.200 Yeah, absolutely, I mean there are regional differences and so 0:05:22.400 --> 0:05:25.599 global managers are really then having to adapt. So the 0:05:25.720 --> 0:05:28.640 underlying building blocks tend to be similar in terms of 0:05:28.680 --> 0:05:31.680 what they're trying to achieve, But then what gets emphasized 0:05:31.720 --> 0:05:34.680 and how it's done, how prescriptive it could get, and 0:05:34.720 --> 0:05:38.400 what goods looks like can vary by region, you know, 0:05:38.440 --> 0:05:41.040 and I guess some examples you could see Europe. They 0:05:41.080 --> 0:05:43.040 do tend to be much more focused on net zero, 0:05:43.520 --> 0:05:46.440 on nature, and they're much more disclosure driven, and so 0:05:46.560 --> 0:05:49.760 this could mean explicit language around these terms, what does 0:05:49.800 --> 0:05:52.880 that zero look like, what are the transition pathways? How 0:05:52.880 --> 0:05:56.040 do you manage to think about portfolio alignment? So we're 0:05:56.040 --> 0:05:59.440 seeing more sophisticated conversations around these and it's not just 0:05:59.560 --> 0:06:01.719 so it's not just about climate, it's broadened into other 0:06:02.360 --> 0:06:07.360 environmental aspects, other regions. You know, you think about Australia 0:06:07.360 --> 0:06:10.480 on one hand, Canada and the other. Historically, Australia has 0:06:10.520 --> 0:06:13.120 had a very strong focus on modern slavery and so 0:06:14.080 --> 0:06:17.560 that has that has been present in mandates and due 0:06:17.560 --> 0:06:20.719 diligence process as well, and so managers there often have 0:06:20.800 --> 0:06:24.320 to demonstrate how they're identifying and managing these risks. And 0:06:24.360 --> 0:06:28.240 then in Canada, you know, manages could span both sort 0:06:28.279 --> 0:06:31.640 of the integration and the impact aspect, with some emphasis 0:06:31.640 --> 0:06:35.359 on climate, but we're seeing much greater focus on indigenous considerations, 0:06:35.760 --> 0:06:39.359 you know, topics like inequality and social justice, and so 0:06:39.880 --> 0:06:43.159 you know, ask then is how is this embedded into 0:06:43.560 --> 0:06:46.320 you know, the investment process, into the research, into the 0:06:46.400 --> 0:06:51.840 risk into the stewardship components. I guess broadly, local impact 0:06:52.000 --> 0:06:56.159 is another one. You know, global managers are seeing, you know, 0:06:56.480 --> 0:06:59.719 the need to adapt there so they can apply global principles, 0:06:59.760 --> 0:07:04.000 but the solutions the stakeholders are quite local and so 0:07:04.240 --> 0:07:07.240 again that focus on community impact that could be quite 0:07:07.279 --> 0:07:10.760 different depending on the region. And so all that to say, 0:07:10.920 --> 0:07:13.800 you know, managers are really thinking about and needing to 0:07:13.920 --> 0:07:17.600 have a core global approach, but with regional overlays so 0:07:17.640 --> 0:07:21.920 that the language, the stewards of focus areas, the local 0:07:21.960 --> 0:07:25.600 impact approach reporting can meet some of these local mandate 0:07:26.280 --> 0:07:30.560 expectations without sort of having a different process everywhere. 0:07:30.720 --> 0:07:33.360 That's super interesting, and I want to shift a little 0:07:33.400 --> 0:07:37.520 into sort of strategies. So based on art if it 0:07:37.680 --> 0:07:41.200 is received by managers, are you seeing any changes in 0:07:41.280 --> 0:07:45.960 where capital is being allocated by astonus? So you know, 0:07:46.320 --> 0:07:49.120 I think of private market shafts, I think of thematics, 0:07:49.200 --> 0:07:51.920 So just any broad observations over. 0:07:51.720 --> 0:07:54.760 There, yes, I mean an acutally, I do think we 0:07:54.840 --> 0:07:58.600 are seeing more queries and interest and increased interest in 0:07:58.600 --> 0:08:01.360 the private market space. But that's not to say that 0:08:01.440 --> 0:08:03.920 interest in public markets has gone away. It's that the 0:08:03.960 --> 0:08:07.720 incremental new idea flow and the curiosity definitely feels stronger 0:08:07.760 --> 0:08:10.880 in private markets. And this is especially as asset owners 0:08:10.920 --> 0:08:13.880 are really aiming to be much more intentional about where 0:08:14.040 --> 0:08:19.080 impact can be sorry potentially essentially can be made more 0:08:19.120 --> 0:08:22.240 clearly and sometimes closer to home. Again, so bringing that 0:08:22.360 --> 0:08:26.520 local component back into it, you know, potential interest in 0:08:26.520 --> 0:08:30.800 private markets. We've seen areas like private debt nature again 0:08:30.880 --> 0:08:38.439 that local impact aspect that are coming true. But again 0:08:38.760 --> 0:08:41.000 public markets is still very much in the mix, but 0:08:41.040 --> 0:08:43.800 the conversations are quite different. So a few years ago 0:08:43.840 --> 0:08:48.800 we probably did see more public markets manager selections around sustainability, 0:08:49.240 --> 0:08:52.600 and that makes sense again investors really thinking about and 0:08:52.640 --> 0:08:55.000 making commitments and then going sort of what we see 0:08:55.040 --> 0:08:59.120 as low hanging fruit, which meant you know, reviewing existing 0:08:59.160 --> 0:09:02.240 lineups within the equity mandates or their fixed income mandates, 0:09:02.320 --> 0:09:05.360 making tweaks with what they already allocate to. So the 0:09:05.400 --> 0:09:09.360 implementation aspect, you know, what kind of impact does does 0:09:09.520 --> 0:09:13.360 an exclusion or an integration framework make and then potentially 0:09:13.360 --> 0:09:17.000 switching to more passive allocations that are sorry to more 0:09:17.040 --> 0:09:21.280 passive sustainable allocations from their core passive and then also 0:09:21.400 --> 0:09:27.240 again adding to the active sustainability our ideas. But again, 0:09:27.320 --> 0:09:30.480 what feels different now is that impact lens and so 0:09:30.520 --> 0:09:34.640 there's much more explicit thinking about where and how impact 0:09:34.640 --> 0:09:38.040 can be made, and that is paired with the increasing 0:09:38.080 --> 0:09:41.480 availability and ideas that we're seeing in private market solution 0:09:42.080 --> 0:09:45.080 and so that's driving more time just on understanding that 0:09:45.200 --> 0:09:48.880 opportunity set, what exists, what is credible, what does it 0:09:48.920 --> 0:09:51.400 take to implement well, so you're kind of seeing a 0:09:51.400 --> 0:09:55.880 two track approach across the public markets from a breath 0:09:55.920 --> 0:09:59.559 and stewardship perspective, and then private markets are more targeted 0:10:00.400 --> 0:10:02.120 measurable outcomes. 0:10:01.720 --> 0:10:03.800 And I think those two go hand in hand, right, 0:10:03.840 --> 0:10:06.480 the impact on the private markets, because as you mentioned, 0:10:07.480 --> 0:10:09.640 how do I say there's people think that you can 0:10:09.679 --> 0:10:13.400 make sort of deeper, more targeted impact within the private markets, 0:10:13.440 --> 0:10:16.920 and the public markets is slightly harder. 0:10:17.200 --> 0:10:21.320 And that does depend on how you define impact. And 0:10:21.400 --> 0:10:23.840 again from the asset owner perspective, what kind of impact 0:10:23.880 --> 0:10:24.760 are you looking for? 0:10:25.160 --> 0:10:27.679 Yeah, fair enough, So I guess I going to come 0:10:27.760 --> 0:10:30.720 to more of the processes. So compared with a few 0:10:30.800 --> 0:10:34.840 years ago, what are managers now being asked to demonstrate 0:10:34.880 --> 0:10:39.199 in r fees in terms of process, data or accountability? 0:10:39.679 --> 0:10:42.160 You know, somebody once told me that when it comes 0:10:42.160 --> 0:10:44.360 to data, you know, if you rely on one source 0:10:44.400 --> 0:10:48.480 of you know, data, it's it's a flag. It should 0:10:48.480 --> 0:10:51.440 be multiple sources or no data. I'm just keen on 0:10:51.559 --> 0:10:54.280 understanding how that sort of angle is going. 0:10:55.760 --> 0:10:59.560 I mean, in terms of what managers are asked to demonstrate, 0:10:59.600 --> 0:11:02.079 it come back to, you know, just being much more 0:11:02.080 --> 0:11:05.200 evidence based. But don't you know, the ask is very 0:11:05.280 --> 0:11:07.640 much don't just talk about the process, but show me 0:11:07.760 --> 0:11:12.120 the evidence. You know, I guess managers are really pushed 0:11:12.320 --> 0:11:14.520 to to show what has changed in the last few 0:11:14.600 --> 0:11:17.839 years that actually strengthens their outcomes or creates an edge. 0:11:18.320 --> 0:11:20.760 And I mean some of this is not necessarily new. 0:11:20.840 --> 0:11:23.960 It comes through in you know, the specialist expertise. There's 0:11:24.080 --> 0:11:28.560 deeper sector, asset class coverage, dedicated analysts, you know, much 0:11:28.600 --> 0:11:31.840 more depth to it. There is now more focus on 0:11:31.880 --> 0:11:35.400 proprietary data and tools. I mean we've seen you know, 0:11:35.520 --> 0:11:41.319 significant expansion in ideas across the you know, what managers 0:11:41.559 --> 0:11:46.640 are doing and how they're approaching proprietary models. And again 0:11:46.679 --> 0:11:49.680 it's not just a proprietary ESG model. It is looking 0:11:49.760 --> 0:11:53.960 at in depth topic. It's looking at topics in depth. Right, 0:11:54.040 --> 0:11:56.960 So you know, look at climate transition, what are the 0:11:57.000 --> 0:12:00.640 components of climate transition and what data provideers you know, 0:12:01.200 --> 0:12:03.599 have this kind of information in place, how are you 0:12:03.679 --> 0:12:06.800 thinking about adaptation and physical risks? You know, what are 0:12:06.800 --> 0:12:10.319 some of those data points related to nature? So it's 0:12:10.520 --> 0:12:14.920 it's quite it's quite granular. And we've seen managers you know, 0:12:15.080 --> 0:12:20.319 developing some really interesting proprietary tools that are much more 0:12:20.360 --> 0:12:23.840 forward looking and much more realistic or reflective i should say, 0:12:23.920 --> 0:12:28.320 of real world outcomes rather than you know, thinking about 0:12:29.200 --> 0:12:34.080 and relying on backward looking at ESG scores. That's probably 0:12:34.280 --> 0:12:36.120 you know. And then in mind with that is I 0:12:36.120 --> 0:12:39.520 guess accountability. You know, who is accountable when it comes 0:12:39.520 --> 0:12:41.560 to the over investment process, So this is not just 0:12:41.600 --> 0:12:46.199 about the data piece, but who is accountable and how 0:12:46.240 --> 0:12:50.959 are our investment decisions made? You know, I guess for 0:12:51.520 --> 0:12:55.160 impact ideas, again, that bar is higher when it comes 0:12:55.240 --> 0:12:58.680 to you know, asks around clarity and credibility. You know, 0:12:59.000 --> 0:13:03.040 asset owners are looking or clearly articulated impact theory of change. 0:13:03.080 --> 0:13:05.599 What are the specific objectives and then what does a 0:13:05.679 --> 0:13:09.960 credible reporting look like? And you know what makes sense? 0:13:10.040 --> 0:13:14.040 And that includes case studies, so that evidence component is 0:13:14.960 --> 0:13:17.000 really is really critical. 0:13:17.400 --> 0:13:20.840 I see, And I guess is there any you know, 0:13:21.400 --> 0:13:26.559 one piece where asset managers are finding more flexibility from 0:13:26.600 --> 0:13:30.320 asset honest you've talked about evidence space, maybe moving from 0:13:30.520 --> 0:13:33.600 genetic to I think more specific like you know you 0:13:33.600 --> 0:13:36.400 said in that zero et cetera. Is there any other 0:13:36.679 --> 0:13:40.040 place where it's another right would but maybe flexibility? 0:13:40.440 --> 0:13:44.840 Yeah, I guess some flexibility. You can think about flexibility 0:13:44.920 --> 0:13:48.440 round engagement, like what kind of engagement methods do managers have, 0:13:48.520 --> 0:13:51.760 how are they prioritizing, what are some of the escalation pathways? 0:13:52.000 --> 0:13:54.960 I mean, there's no one set approach, and so I 0:13:54.960 --> 0:13:58.320 think asset owners are flexible on that. But that's provided 0:13:58.320 --> 0:14:02.840 that managers can actually evidence a credible process and outcomes 0:14:02.880 --> 0:14:07.840 over time. So again just thinking about engagement with objectives 0:14:07.840 --> 0:14:11.240 in mind. I guess one area, you know, we are 0:14:11.280 --> 0:14:14.880 seeing the spokes solutions that are becoming part of the conversation. 0:14:15.120 --> 0:14:18.959 So it's less about mandate selection but more so focused 0:14:19.000 --> 0:14:23.040 on manager selections. So they're looking for that manager alignment 0:14:23.280 --> 0:14:27.000 and ability to execute, and that just means that asset 0:14:27.040 --> 0:14:31.000 owners are effectively developing their own fund design but looking 0:14:31.040 --> 0:14:34.480 for managers who can implement this. So you know, again 0:14:34.520 --> 0:14:37.840 they're not thinking about an off the shelf type of strategy, 0:14:38.480 --> 0:14:42.920 but really focusing on the alignment aspect the experience. How 0:14:42.920 --> 0:14:46.040 can you operationalize a custom set of constraints that we 0:14:46.160 --> 0:14:49.360 have and so on the one hand, these r fees 0:14:49.400 --> 0:14:53.040 can be quite specific and so they do require back 0:14:53.120 --> 0:14:55.720 and forth between the asset only and the asset manager 0:14:55.720 --> 0:14:58.720 and that includes running stimulations, you know, based on the 0:14:58.720 --> 0:15:00.600 criteria that they have is well as some of their 0:15:00.640 --> 0:15:05.960 portfolio implications or consequences. And so the flexibility then comes 0:15:06.000 --> 0:15:10.680 around potentially tweaking some of the criteria on aspects like 0:15:10.800 --> 0:15:14.840 you know, streams or increasing exposure to certain solutions or 0:15:14.880 --> 0:15:18.120 best in class ideas or sort of thinking about what 0:15:18.240 --> 0:15:22.000 that you know, transition piece might look like. So where 0:15:22.000 --> 0:15:25.720 do they set the bar? You know, so there's there's 0:15:25.760 --> 0:15:27.840 a bit of bracket back and forth just to get 0:15:27.880 --> 0:15:30.960 that to get to a place that aligns with what 0:15:31.080 --> 0:15:32.400 asset owners are looking for. 0:15:32.760 --> 0:15:35.440 I see. So, you know, you spoke about ways in 0:15:35.480 --> 0:15:39.800 which sustainability can be integrated, can be expressed. So there's integration, 0:15:40.040 --> 0:15:44.640 this chematic allocation, this engagement. I guess, how do managers 0:15:44.680 --> 0:15:49.840 decide how sustainability is expressed in portfolios? What trade offs 0:15:49.960 --> 0:15:53.840 usually dry that choice? And right now is one being 0:15:54.840 --> 0:15:56.000 expressed more than the other? 0:15:57.240 --> 0:15:59.800 Yeah? I think I would see this as sort of 0:15:59.800 --> 0:16:04.920 think about the investment propositions as a whole. You know, 0:16:03.800 --> 0:16:06.440 if you if you kind of look at the investment 0:16:06.520 --> 0:16:10.400 landscape around ESG and sustainability. There are two ways that 0:16:10.440 --> 0:16:14.240 I think about this, and one is really what applies 0:16:14.280 --> 0:16:17.560 to all investment ideas, and that's the integration piece. And 0:16:17.600 --> 0:16:20.120 then there's that component around what applies to just a 0:16:20.160 --> 0:16:23.600 subset of the opportunity set, and this is really then 0:16:23.640 --> 0:16:29.600 getting into the variations of sustainability themes on integration. This 0:16:29.680 --> 0:16:32.960 is again this is probably this has become mainstream. You know, 0:16:33.040 --> 0:16:37.960 fifteen years ago there was there was very clear differences 0:16:38.000 --> 0:16:41.880 in how managers were approaching you know, the integration aspect. 0:16:42.840 --> 0:16:45.760 Today this is almost part and parcel of you know, 0:16:45.800 --> 0:16:49.320 the due diligence the investment process, and part of that 0:16:49.440 --> 0:16:53.600 is just because of the data availability and everything that 0:16:53.640 --> 0:16:56.200 we see happening in the world today. You know, there 0:16:56.360 --> 0:17:00.800 is a potential for external factors that can affect the 0:17:00.920 --> 0:17:05.240 value of a company, and so regardless of beliefs, portfolio 0:17:05.280 --> 0:17:08.560 managers need to be thinking about that potential impact on 0:17:08.680 --> 0:17:11.400 the corporate value of a company. So the question there 0:17:11.440 --> 0:17:15.400 is then how are managers integrating these financially material risks 0:17:15.440 --> 0:17:18.960 into their deep diligence And so that's kind of become commonplace. 0:17:19.800 --> 0:17:23.360 But then there is the opportunity set across sustainability themes, 0:17:24.160 --> 0:17:28.399 and this has also evolved and it's become you know, 0:17:28.440 --> 0:17:31.040 it's kind of moved from just a broad sort of 0:17:31.040 --> 0:17:34.440 sustainability bucket to how we see sort of a variation 0:17:34.560 --> 0:17:37.960 of approaches, you know, and that's thinking about ideas across 0:17:38.000 --> 0:17:43.760 transition and impact. And again these are ideas that are 0:17:43.760 --> 0:17:49.840 focused specifically on thematic allocations, but managers offer ideas using 0:17:49.880 --> 0:17:54.280 slightly different approaches. Now, this is a super interesting area 0:17:54.320 --> 0:17:57.639 because we are seeing a lot of evolution, But I 0:17:57.640 --> 0:18:01.000 wouldn't necessarily say that they're focusing on the trade offs 0:18:01.000 --> 0:18:03.600 in order to drive the choice because in some cases, 0:18:03.720 --> 0:18:06.160 this is where we see managers really being forward thinking 0:18:06.400 --> 0:18:11.160 in identifying and capturing that opportunity set. So we've seen 0:18:11.200 --> 0:18:13.720 a number of new ideas emerging as a function of 0:18:13.880 --> 0:18:18.200 broader initiatives and global agreements. Right, so you think about 0:18:18.280 --> 0:18:21.320 the Sustainable Development Goals or the Paris Climate Agreement or 0:18:21.359 --> 0:18:24.040 the Global Biodiversity Framework. I mean these are agreements that 0:18:24.040 --> 0:18:27.680 have really led to a number of different initiatives, such 0:18:27.720 --> 0:18:32.960 as the TCFD, the TNFD, engagement on these topics by managers, 0:18:32.960 --> 0:18:39.720 and then managers subsequently really developing investment strategies around diversified themes. Now, 0:18:40.119 --> 0:18:42.040 you know, they could potentially be ahead of the curve, 0:18:42.160 --> 0:18:44.080 but it's a way for them to also understand the 0:18:44.160 --> 0:18:47.400 investment universe, to learn what companies are doing, what does 0:18:47.440 --> 0:18:49.960 best in class look like, you know, where are some 0:18:50.080 --> 0:18:53.280 of those risks and where companies are potentially not doing well, 0:18:53.560 --> 0:18:56.679 and then later thinking about that opportunity set when it 0:18:56.720 --> 0:19:01.320 comes to the solutions providers, and then as the rest 0:19:01.359 --> 0:19:04.040 of the industry picks up, you know, you'll see asset 0:19:04.119 --> 0:19:07.359 owners then asking more questions about this, and sometimes it 0:19:07.440 --> 0:19:11.280 leads to, you know, particular mandates, and sometimes it's just okay, 0:19:11.280 --> 0:19:15.760 I want to understand how managers might be integrating these risks. 0:19:16.119 --> 0:19:20.000 So would they take that financial materiality aspect and say, like, 0:19:20.200 --> 0:19:23.439 how are you thinking about this across a mainstream or 0:19:23.520 --> 0:19:26.360 core portfolio rather than something that is more thematic? 0:19:27.160 --> 0:19:30.720 Okay, and maybe just one photo of questions. You spoke 0:19:30.760 --> 0:19:34.040 about the themes and you know, these new innovative ideas 0:19:34.080 --> 0:19:37.600 that are coming out. Is there any one direction that 0:19:38.000 --> 0:19:41.600 you think the market is moving to us, or you know, 0:19:41.640 --> 0:19:45.080 any interesting themes that have come to light that have 0:19:45.160 --> 0:19:48.400 caught your eye. I'm thinking I see really far out things, 0:19:48.880 --> 0:19:52.080 So I'm just curious as to what you're actually seeing 0:19:52.080 --> 0:19:52.639 on the ground. 0:19:53.920 --> 0:19:57.320 Again, I think it's just a function of what some 0:19:57.440 --> 0:20:01.120 of the regions are looking at how thinking about this. 0:20:02.560 --> 0:20:07.120 I'm based in Canada, so there is a significant focus 0:20:07.160 --> 0:20:12.000 on just understanding you know, indigenous considerations. What does that 0:20:12.119 --> 0:20:18.200 mean from a from an investment perspective. We're in I mean, 0:20:18.240 --> 0:20:20.879 i'd say for the for the masses, we're in a 0:20:20.960 --> 0:20:24.600 learning stage and so it's you know, it's sort of 0:20:24.600 --> 0:20:26.840 a step function in terms of getting to that point 0:20:26.880 --> 0:20:31.360 of really understanding that an opportunity set that can kind 0:20:31.359 --> 0:20:34.560 of get out to the masses. But it you know, 0:20:34.600 --> 0:20:38.200 it does end up becoming quite region specific in terms 0:20:38.240 --> 0:20:39.200 of new ideas. 0:20:40.480 --> 0:20:44.720 I see, Okay, I guess you know, despite I think 0:20:44.760 --> 0:20:48.000 this goes back to maybe some of my first few questions, 0:20:48.040 --> 0:20:53.240 but despite this noise around ESG, I guess what has 0:20:53.320 --> 0:20:57.960 stayed consistent? What do mandos need to have regardless of 0:20:58.560 --> 0:20:59.360 everything going on? 0:21:00.080 --> 0:21:04.040 I mean, a clear process in place? I mean in 0:21:04.119 --> 0:21:07.159 terms of what has fayed consistent. You know, we, I 0:21:07.160 --> 0:21:12.040 guess from our perspective, we look at investment ideas. We 0:21:12.160 --> 0:21:16.200 follow a relatively structured process and that's really then assessing 0:21:16.240 --> 0:21:19.600 the underlying investment capability or the strategy that the manager 0:21:19.640 --> 0:21:23.119 has in place, right, and so that captures aspects like 0:21:23.240 --> 0:21:26.399 idea generation. So what is your philosophy? You know, what 0:21:26.520 --> 0:21:29.359 is the investment process? You know, what do you see 0:21:29.400 --> 0:21:33.359 as having you know, within your process that gives you 0:21:33.400 --> 0:21:35.800 a competitive edge? You know, what kind of resources do 0:21:35.840 --> 0:21:38.240 you have in place that kind of captures, broadly speaking, 0:21:38.320 --> 0:21:42.880 the idea generation component. And then you've got portfolio construction, 0:21:43.000 --> 0:21:45.960 which is then translating these ideas into a portfolio that 0:21:46.040 --> 0:21:52.000 is reflective of your investment philosophy. You know, the implementation aspects, 0:21:52.040 --> 0:21:55.760 So thinking about the trading, the turnover, how much are 0:21:55.800 --> 0:21:59.760 you actually using in turnover in terms of costs and such? 0:22:00.920 --> 0:22:03.080 You know, what are the fees of strategy and such. 0:22:03.119 --> 0:22:06.320 And then overarching all of that is the business management aspect. Right, 0:22:06.359 --> 0:22:10.360 We're looking for stability of the business, a strong environment 0:22:10.440 --> 0:22:16.679 and culture, and just good alignment between between investors you know, 0:22:16.760 --> 0:22:19.760 and their underlying base. So you know, in terms of 0:22:20.280 --> 0:22:24.680 consistency from a manager perspective, you know, we always continue 0:22:24.720 --> 0:22:27.760 to see managers, any new idea that comes out really 0:22:27.800 --> 0:22:33.520 follows that overarching approach. Now, there are obviously nuances in 0:22:33.640 --> 0:22:37.440 terms of new ideas, but then that I would see 0:22:37.440 --> 0:22:39.720 a number a bit of that coming through in the 0:22:39.760 --> 0:22:44.119 idea generation component. Right, how are you identifying ideas as 0:22:44.200 --> 0:22:47.920 it relates to a particular theme or a new area? 0:22:48.359 --> 0:22:51.440 I see. So it sounds like, you know, the typical 0:22:51.800 --> 0:22:54.159 sort of what makes a good manager a good venture right, 0:22:54.200 --> 0:22:56.639 The competitive advantage, implementation, et cetera. 0:22:57.280 --> 0:23:00.840 That makes sense just to say, like within the sustainability component, 0:23:00.960 --> 0:23:04.240 like there is there's like there's evolution there and some 0:23:04.400 --> 0:23:07.280 of that is coming through. And you know, again you 0:23:07.359 --> 0:23:11.520 see a lot of industry initiatives around understanding the impact. 0:23:11.720 --> 0:23:13.560 Now you know, some of this again is kind of 0:23:13.560 --> 0:23:16.480 focused on the product market side. But how do you like, 0:23:16.560 --> 0:23:20.880 what is that intentionality you think about, you know, intentionality, materiality, 0:23:21.160 --> 0:23:25.720 additionality and such. You know, it's that kind of framework 0:23:26.280 --> 0:23:29.920 fits within this overarching sort of four factor and and 0:23:30.119 --> 0:23:33.520 how we would assess investment ideas and such. It's just 0:23:33.600 --> 0:23:36.240 kind of building it into that framework with those additional 0:23:36.320 --> 0:23:42.320 nuances that are specific to impact strategies and sustainability games. 0:23:43.080 --> 0:23:46.480 I see, Okay, I guess you know how and maybe 0:23:46.480 --> 0:23:49.960 you've answered this question in thought, But how have any 0:23:50.000 --> 0:23:54.600 of these you know changes, this this shift from genetic 0:23:55.240 --> 0:23:57.679 domes let's just call it genetic the more you know 0:23:57.960 --> 0:24:02.800 chematic or defined domes. How is that altered? How morech 0:24:02.840 --> 0:24:07.080 so evaluates or differentiates managers in practice? Just if you 0:24:07.160 --> 0:24:10.240 put like a broad brush over anything that's changed. 0:24:11.440 --> 0:24:13.280 No, I mean again, it kind of comes back to 0:24:13.680 --> 0:24:18.000 you know, the components we're looking at investment strategies, you know, 0:24:18.400 --> 0:24:20.800 so that kind of takes that global approach, right, what 0:24:20.960 --> 0:24:25.800 is it that the manager is offering? The regional variations 0:24:25.920 --> 0:24:29.640 can become quite specific, and so you know, I guess 0:24:29.640 --> 0:24:32.600 the key question that we ask if managers are tweaking 0:24:32.720 --> 0:24:37.840 anything for within a strategy to to make it work 0:24:37.880 --> 0:24:41.200 in a particular region is how much of that potentially 0:24:41.240 --> 0:24:45.280 affects the investment universe. And so you know, you need 0:24:45.320 --> 0:24:51.200 to if you're if you're changing, if you're completely changing 0:24:51.240 --> 0:24:53.280 the approach you know for a region, then obviously it's 0:24:53.280 --> 0:24:56.520