TCorp recruits top ESG talent

My decision to move to TCorp was both professional and personal. 

At Mercer, I gained enormous perspective and breadth into global best practices in sustainable investment and stewardship across all asset owners, from super funds to endowments to insurers and sovereign wealth funds. While being an investment consultant provided me with great insights into how sustainable investment strategies are designed and championed, I frequently felt unsatisfied at not being able to see our advice through to full implementation.

Moving to an asset owner was the next natural step for me, with a desire to get closer to investment decision-making and ultimately member or stakeholder outcomes. In my new role at TCorp, I will be reporting directly to Stewart Brentnall, the chief investment officer, and I will become a member of the investment leadership team. I hope to have a better opportunity to ensure that robust integration of ESG factors and good investment stewardship have a meaningful impact on our clients' risk-adjusted returns. 

I look forward to working with new colleagues like Tanya Branwhite - head of portfolio construction - to integrate ESG into portfolio construction and scenario testing and with Adrian Trollor - head of partner selection - to fully leverage our partnerships with TCorp's appointed fund managers.

While I have done this in my previous role as head of investment stewardship, I will have more skin in the game for ensuring robust implementation of the stewardship strategy. 

In 2021, Mercer and TCorp worked closely with State Super to enable the fund to announce its net-zero by 2050 commitment. Now that I am at TCorp, I will have to ensure we deliver on that promise and show real progress towards that goal within the defined benefit fund while broadening this commitment further across the combined New South Wales family of funds.

Since 2017, I've advised TCorp on its investment stewardship journey as it was just beginning. I've seen the strategy and team grow and flourish to become one of the most sophisticated and well-regarded in the industry. I look forward to serving the people of New South Wales by ensuring the assets entrusted to TCorp are truly managed wisely and sustainably. 

I see great opportunity in digging deeper into embedding ESG into the Total Portfolio Approach that lies at the heart of TCorp's investment strategy.

It's probably a bit premature to say exactly how it works. However, one of the benefits I suspect I'll find when integrating ESG within a TPA approach is that asset class silos are broken down and there is a much more acute focus on risk first, as opposed to return.

Take a sustainability issue like climate change. A more traditional approach might look at its expected impact on risk-adjusted returns on an asset class basis and then roll those up to get a picture of the whole diversified portfolio.

In contrast, TPA might be more comfortable taking on more climate transition risk in one part of the portfolio because it has substantially reduced it elsewhere, and - at a total portfolio level - the climate risk exposure is within the risk budget for the portfolio. This may be particularly important for portfolios with substantial illiquid real assets.

I am most excited about issues like: How can we better assess and address ESG risks within private markets and real assets, given a lack of consistent data? And, beyond climate change, how might we begin to undertake risk analysis or scenario testing on key social issues such as health, inequality, and a just low carbon transition? As an industry, we are a long way from being able to really scenario test the impact on portfolios of major social issues. I have yet to see any models that really try to do this.

As far as challenges go, this will be my first experience working in the public sector, so I am sure I will have a lot to learn about how TCorp makes and implements decisions.

On the issuance side of the business, I look forward to partnering with Rob Kenna, general manager, financial markets, and his team to continue issuing sustainability and/or green bonds on behalf of the state and ensuring that these issuances reflect global best practice.

Paradoxically, I would say the recent change in government affects sustainability in Australia both enormously and not at all at the same time. The new government has a huge opportunity to change Australia's position on the global stage when it comes to sustainability broadly - and climate change specifically - by making clear, ambitious, and medium-term commitments to reduce our national emissions consistent with the Paris Agreement and a net-zero future.  

On the other hand, the state governments throughout Australia (including in New South Wales) have already leapfrogged the federal government on climate ambition, and those will be the real key drivers of a low carbon transition across Australia.

The Taskforce on Nature-related Financial Disclosures (TNFD) is very important. Given Australia has some of the strictest biosecurity laws in the world, and a strong commitment to conservation, hopefully, this new initiative will be embraced warmly.

In the investment business, TCorp established a new strategy for select clients last year, which offers a differentiated risk and return profile by focusing on infrastructure-related opportunities that are underpinned by sustainability trends.

The strategy is positioned to align with the UN Sustainable Development Goals 7, 9, and 11. These specific goals include themes such as decarbonisation, connectivity and data, mobility and logistics, smart cities, and health and social infrastructure.

On the financial markets side of TCorp's business, proceeds from bonds issued under its NSW Sustainability Bond Programme align with, and contribute towards meeting the United Nations Sustainable Development Goals and support the government's environmental and/or social objectives.

In some cases, poor management of ESG issues or recurring ESG controversies can be a harbinger or poor corporate management overall. However, in many cases, I would suggest that an unravelling of culture is a more apt canary than ESG broadly. Given that ESG data is incomplete and quite inconsistent, one shouldn't expect data analysis alone to show you where the deepest investment risks lie. Rather, the best ESG integration requires great investment partners, thorough due diligence, and rigorous transparency and accountability.

 I'd say across the investment industry, some social and governance issues are starting to gain more attention but overall, they are still playing second string to climate. Russia's recent invasion of Ukraine has led many (including TCorp) to begin to re-evaluate how they assess governance risk at both a sovereign and corporate level and under what circumstances divestment or exclusion might be appropriate. 

Among social issues, inclusion and diversity, and modern slavery appear to be the priorities. Recent empirical research around the investor case for diversity as well as examples of significant value destruction arising from poor corporate culture and inclusion have bumped diversity up the priority list. At the same time, the Commonwealth Modern Slavery Act has served to focus the mind on the deeply troubling and challenging issue.