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Commentary: Asset Owners Should Look to Lead the Transition to a Sustainable Future

September 02, 2020

This article, written by Wespath's Chief Investment Officer Dave Zellner, was originally published in Pensions & Investments (pionline.com)

As we reflect on recent world and market events, those of us with the ability to influence next steps must focus our efforts on supporting the creation and development of a more sustainable global economy that improves market outcomes for all stakeholders.

This is especially true in the asset owner community, where large pools of capital have proven to be useful leverage in shareholder engagement and other ESG initiatives.

As the chief investment officer at Wespath Benefits and Investments, a faith-based asset owner and sustainable investor with a total of $24 billion in assets across its subsidiaries, I know firsthand that asset owners are united by a common focus on the long-term interests of their constituents.

All too often, however, stewards of capital direct their attention toward simply meeting or exceeding the performance of stated investment benchmarks. In this moment, we must recognize that seeking to accomplish our financial goals should inspire us to advocate for, take part in and lead discussions and actions promoting long-term sustainable investing. We strongly believe that these actions will lead to better market returns.

Wespath is a founding signatory of the United Nations Principles for Responsible Investment, and we are proud of our work promoting sustainability-related topics like ESG integration and climate risk mitigation. During my time leading our investment activities, I have witnessed how the market's response to these issues and others has evolved, and how asset owners can benefit from leading these conversations.

Our own investment strategy maintains an aspirational, long-term vision for a sustainable global economy — one that promotes economic prosperity for all, social cohesion and environmental health. We believe the transformation to this sustainable global economy will help ensure the development of healthy financial markets and resilient companies, ultimately improving market outcomes.

Of course, the recent coronavirus pandemic — and economic uncertainty that has ensued — threatens to disrupt these efforts. In response to this global crisis, as an asset owner, we have sought to leverage our existing investment framework to guide actions that not only address the near-term effects of the virus, but also place the global economy on the path to a sustainable future.

For instance, in March, Wespath signed the Investor Statement on Coronavirus Response calling on members of the business community to demonstrate leadership in corporate citizenship and assist the communities where they conduct business, including working with their employees to find ways to support local businesses. We also urged banks to take common-sense actions to support viable borrowers. We then engaged with all our asset managers, encouraging them to take similar actions.

We believe that these steps taken now will play a crucial role in defining the speed and strength of the economic recovery for the long-term.

These actions represent just a snapshot of our COVID-19 response plan; we trust that each of our asset owner peers will identify activities that resonate best for them and their stakeholders. However, as a community, we collectively need to be thinking as big as ever.

Just as it is clear that responding to COVID-19 will require bold, creative and coordinated action, asset owners are beginning to recognize that a "business-as-usual" approach to the challenge of long-term systemic issues such as climate change or social inequality — as witnessed with recent global protests calling for racial justice — threatens our collective ability to fulfill the long-term investment goals of our stakeholders.

We recognize many groups of like-minded investors are elevating engagement strategies on these key issues. Some groups — such as the newly formed Net-Zero Asset Owner Alliance, which Wespath joined earlier this year — are specifically focusing on how asset owners can best contribute to climate risk conversations. More broadly, the Investor Statement of Solidarity to Address Systemic Racism, shows that leaders in our industry are identifying ESG issues as investment issues. This reminds us that we are far from alone in our efforts.

In recent years, asset owners have started demonstrating greater involvement in ESG integration and sustainability best practices as a means of supporting and improving long-term returns, and we fully expect that this momentum will continue in the post-pandemic world. But beyond the increasingly mainstream acceptance that ESG integration adds to shareholder value over time, I believe asset owners can drive additional value for our organizations by bringing our leadership and expertise to these rapidly evolving conversations.

The insight we gain from this leadership inspires more thoughtful and informed discussions internally, with our peers and with industry partners. We can then build upon these relationships to better position our funds and help improve market returns, ultimately benefiting our individual and institutional stakeholders.

The world's ability to transition to a sustainable global economy will ultimately impact the returns of all asset owners. Rising to the challenge of this transition will require that investors think creatively in redefining prudent fiduciary practice in a rapidly changing world. We welcome our peers as together we stand ready to confront this challenge.

David Zellner is chief investment officer of Wespath Benefits and Investments, affiliated with the United Methodist Church, Glenview, Ill. This content represents the views of the author. It was submitted and edited under Pensions & Investments guidelines, but is not a product of P&I's editorial team.

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