BT Financial Group (BT) is one of Australia’s largest wealth managers, providing its customers with a broad spectrum of wealth services, including investment, superannuation and retirement income products, investment platforms, financial advice, private banking and insurance solutions.
We spoke with Emma Pringle, Head of Customer Governance and Sustainability, about BT’s leadership in responsible investment, why they’ve decided to provide advisers and investors with sustainability scoring, and where she thinks responsible investment is headed.
- What drives BTFG to engage in responsible investment, and how do you integrate this into your work?
At BT we are committed to constantly seeking ways to help our customers and their families prepare for their best financial future, for the here and now and for generations to come. The forward-looking nature of our vision really speaks to our approach to responsible investment, and sustainability more broadly. At BT our focus is about how we can help our customers, to drive sustainable growth, better outcomes and, ultimately, contribute to a stronger economy.
As we know, sustainability is really about taking a long-term view across business and considering environmental and social outcomes, along with the economic. We believe that responsible investment is intrinsic to the provision of long-term value for our customers. It’s well known that environmental, social and governance (ESG) issues have the potential to affect the risk and return of investments.
We also know that when our customers come to us they are not just thinking about their finances, they’re also thinking about how decisions today will affect their future, and – in many cases – the next generation’s future.
BT has a long history associated with responsible investment. Well before committing as one of the early signatories to the Principles of Responsible Investment in 2007, BT offered responsible investment strategies to our customers. Over the last decade we’ve continued to integrate ESG across the portfolios managed by our internal investment team, with a focus on active ownership (engagement and voting) and ESG integration into investment decision-making. We’ve also worked collaboratively across the industry, supporting organisations such as RIAA to ensure the growth of responsible investing.
- BTFG provides its platform users, including advisers and investors, with sustainability scoring that helps them identify and analyse investments based on environmental, social and governance (ESG) performance, and thus make more informed investment decisions. What has driven the creation of this feature of your platforms?
BT is committed to providing insights and information to assist our customers in making more informed investment decisions. The question became: we believe that the consideration of ESG issues in the investment process drives better financial and non-financial outcomes – how can we help our customers get access to this information as well?
At the start of 2017 we integrated sustainability scoring across more than 200 managed funds as well as ASX 200 listed companies into our wealth platform, BT Panorama.
Providing these scores on BT Panorama gives retail customers and financial advisers easy access to information that has traditionally been only accessible to institutional investment teams.
Enabling our customers to access this information is a tangible example of the importance that BT places on integrating the consideration of sustainability factors into the investment process, and an opportunity to demonstrate leadership in this area.
The scoring was developed in partnership with independent research house Morningstar and ESG research provider Sustainalytics. Investors can access an overall sustainability score for their investment as well as individual scores for environmental, social or governance factors, along with a controversies assessment, taking into account top of mind issues the company is encountering.
We wanted to show that, whilst sustainability scores are not an evaluation of an investment’s financial performance and do not provide a complete assessment of overall investment merit, they are another tool that investors can use when making better informed investment decisions.
- What trends are you observing in terms of BTFG customer expectations around responsible investment?
As we all know there is no lack of interest in responsible investment – BT’s own research last year showed that nine in ten Australians are interested in sustainable investing, showing consistent themes with RIAA’s research in this space.
We are noticing more and more – especially with emerging Gen Y customers – that customers expect a baseline of responsible investment across all asset classes. It’s no longer a differentiator but rather a ticket to the game.
However, what we’re seeing, through our conversations with our customers and adviser network, is that confusion still exists about what is (and what isn’t) a responsible investment; what investors can expect from a sustainable or ethical fund, in terms of performance and also characteristics; and how to access responsible investment products.
In particular we noticed that advisers need tools to help them engage with their customers on responsible investment. The role of the adviser is so central to the process, so we’re keen to look at ways we can help advisers have an informed conversation with their customers about responsible investing and provide the tailored, personalised advice that customers are looking for.
- How do you measure your effectiveness as a responsible investor?
Our approach to sustainability is constantly evolving as we seek to integrate sustainability more fully into our corporate strategies across all our business portfolios, and responsible investment is no small part of that.
The obvious successes are when we can point to a change in a company that we know our engagement contributed to, or when we can announce a new position or policy that will not only improve the standards of our own funds but that encourages others to follow.
However, what’s most important to BT is to stay focused on our members and customers, and our role as stewards of their assets. We believe that responsible investing is essential for long-term value for our customers. In that context, one measure of effectiveness has to be the degree to which responsible investment principles are considered in mainstream funds – that is, across all our investment products and not just within specialist funds.
BT first released its responsible investment position statement in 2015, which explained to our customers how we manage ESG risks in their investments, across all our portfolios. Last year we built on this position outlining our approach to exclusions and the decision to exclude tobacco, controversial weapons and severe breaches of accepted business standards from equities in our flagship ‘lifestage’ superannuation portfolios. We also recently updated our climate-related disclosures to provide customers and members with more information about how we identify, manage, assess and measure climate-related risks in our portfolios, with consideration of the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD).
As we all know, responsible investment isn’t static, it is a constant process of ensuring that, within the bounds of each fund or investment, we are considering and managing ESG risks in our customers’ portfolios. Maintaining a continuous development approach is how we can be most effective at this.
- Where do you think responsible investment is headed and what’s next for BTFG in this space?
Responsible investment is growing in so many aspects. In Australia we’re seeing an increase in funds under management into managed funds that employ one or more responsible investment strategies. This is being driven both through customer choice, but also through more managers seeing the value in integrating ESG and stewardship principles into their portfolios. We’re seeing more products becoming available, and across more asset classes. We’re also seeing a huge amount of interest in thematic investing and impact investing – even if people don’t necessarily understand the scope of these areas, they’re very excited about it!
Our focus is on continuing to develop our own approach to responsible investment, focusing on our four responsible investment principles:
- Considering factors in the investment process can help drive better financial outcomes and improve risk-adjusted returns;
- Making solutions available to our customers to empower them to manage their own environmental and social impacts;
- Recognising that as institutional investors and stewards of our customers’ money, we have a responsibility to be active owners; and
- Transparency counts.
BT is continually seeking to deepen its approach to responsible investing both in the funds we manage and also by providing our customers with insights and information to help make more informed investment decisions.