In this week’s Responsible Investing podcast, Amanda Young interviews our Global Head of Distribution, Campbell Fleming. Campbell tells us why impact investing is particularly close to his heart. He also discusses the defining responsible investment moments in his career and explains why companies need to do more than just ticking boxes when it comes to ESG issues.
Operator: The Responsible Investing Podcast, by Aberdeen Standard Investments.
Amanda Young: Welcome to the Aberdeen Standard Investment's Responsible Investing Podcast. I am delighted to be joined today by Campbell Fleming who is our Global Head of Distribution. Welcome, Campbell.
Campbell Fleming: Great to be here, Amanda, thanks for having me along.
Amanda: Now, while Campbell lives in England, he originally hails from Australia. He has had a long career in financial services but started out in the legal profession as a barrister. Campbell came into financial services as an advisor and in, I believe, your own words, Campbell, the bag carrier to the chair of Robert Fleming Asset Management in London. Now, in his spare time, Campbell enjoys a good meal with friends and a bit of cooking and some sailing.
The great thing is, Campbell has been a long advocate of Responsible Investment with a particular focus on impact investing, being involved in launching one of the very first social bond funds in the UK. I'm keen to kick-off and hear a little bit about Campbell, how you feel, personally, it is important for investors to consider environmental social and governance issues as part of their wider investment strategy.
Campbell: Amanda, thanks also for that wonderful introduction. Look, I think it's absolutely critical today especially in this highly interconnected world where people are very mobilized. Whether you're a company an issuer or any business, the impact of getting any of these things wrong around your engagement with society, the client, the community, and the climate can seriously harm the market capitalization and prospects of any company.
As a result, investors who also, I think, increasingly accepting their obligation that they must not only generate decent returns but also have more of an impact on societies and the planets, have to factor these things in and that's why I think it's critical. I'm delighted to be an Aberdeen Standard Investment where we've been doing this from the early '90s.
Amanda: Were there any particular defining moments in your career that brought home to you the importance of these softer issues such as social inequalities, human rights, and environmental management?
Campbell: Yes, there are a couple. Several years back, we had an initial runner, this was pre-GFC about trying to create a new product that would generate annuity for the Prince's Trust, it was called invest and given. It was probably a little bit before its time but it was a coalition of willing fund managers and administrators and we were trying to create a new savings that would generate annuity income for the Prince's Trust so it could continue its work with communities and especially the youth.
Secondly, was the involvement in investment 2020, which was getting people from communities other than your traditional Oxbridge intakes and giving them an opportunity to join the industry and make an impact. Probably the most important note as I saw a Ram Lord Coe and speak about recidivist bonds at a city livery dinner. I thought, "Wow, that is amazing if we could start to create and take some of these things to the mainstream, and ensure that big earners of capital and light and investors were able to use their assets, their annual tax allowances and their pensions to actually make really profound impacts to communities people on the planet."
Amanda: That's really interesting because it takes us on to impact investing, and this is an area that you've been a long advocate and for actively promoting impact investing to the industry and encouraging them really to embrace a new type of investment. Maybe some of our listeners aren't really aware of what impact investing is. Perhaps you can explain what we mean and also, what this type of investment strategy why it appeals to you.
Campbell: Sure. Well, terrific initiatives around UNPRI and around ESG but as you know, some firms just use it as a tick box exercise and say, "Great, you've got a compliant ESG investment strategy because we satisfied all the statements and all the tests." I just think that's table stakes, now that's just the hygiene factor. What impact investing about is truly making sure that those investments are invested in companies that really adhere to and believe in those principles.
Then, in connection with that, starting to extend it into what people may call microfinance, what people might call social finance, to make sure that mainstream capital is available and deployed for charities to do really interesting work, such as recidivists bonds or around social housing. One thing that I'm hearing about at the moment, with COVID-19, there's been a significant increase in domestic abuse and there's a shortage of really safe property for people who are the victims of it.
There's an initiative to increase the amount of properties that are available for people who are such victims. I really do think that capital can be deployed, they have a real and genuine and lasting impact on people's lives in our communities, and that's what it's about. It's not just measuring economic return, but it's also putting some metrics and it's also putting some measures around true reform of significant issues.
Another great example I'm hearing about is the sugar issue and obesity in the young and the old, what's being done there because if you think about, the long tail effect on society having to deal with the diseases connected to obesity, and what the cost is, it's better to start to address it at source and try and improve people's lifestyles and the way they approach these things through education and other approaches. There is another example of real impact. I believe capital can be deployed into the right initiatives and into the right businesses to have a profound impact and we're seeing it.
Amanda: Now, you mentioned that because it is really exciting to see this move of capital and a really positive social, environmental, and financial way. You did, in that answer, just touch a little bit about greenwashing. There are often accusations that responsible investment is just a marketing ploy that businesses greenwash to cover up poor business practices. In my experience, strong, responsible corporate practices need to be led from the top.
Now, you are someone who has held some very senior positions within some really big firms, as well as having had a really long career in the industry, which has been marred by its own scandals. I'm really keen to get your view on what attributes you believe senior leaders need to have to lead with integrity.
Campbell: That's a terrific question. I'm still working at this because I think leadership is about pretty similar parenthood and we all know how difficult that is, children don't come with a manual or notice of parental outside.
Amanda: No, they don't.
Campbell: Look, I think it's a couple of things here. The first thing is, I think you've got to really think about the purpose of your organization and what you're trying to do and make sure that the whole firm understands it, and then you've got a series of actions and behaviors that drive towards that purpose so people understand, not only what we're trying to do, but how we want to go about doing it. For instance, what we've been doing at Aberdeen Standard Investments and across Standard Life Aberdeen is talking about together we invest for a better future.
Then slightly breaking that down to say, "Well, for example, invest for the better future. What does that mean for our people?" Well, one of the things you said we've got to get future-fit and we've got to build the future now by getting it done together, and bringing the client and customer under everything we do. Those things may sound a little neat and slightly marketing, but actually, they have a profound resonance with a lot of our people, and what it ends up doing is that the firm starts to talk in these terms and phrases, and their behavior starts to follow along around it.
To me, it's about having a true purpose that resonates with your people and then making sure you live and breathe that purpose through a clear understanding of what the values and actions are that the firm wants to see in all its engagements. What's really interesting now is some of the largest investors in the world and their advisors are now asking you about your culture, your purpose, and not just about how you reward people, but what your values are and how you apply them.
I think that is going to be one of the great ways that the industry avoids some of these scandals of the past because a lot of these scandals are absolutely- counter, cultural, a good culture.
Amanda: Absolutely. As investors, it's quite difficult, perhaps to dig underneath that bullet to make sure that you can see beyond the marketing speak. In your view, what do you think the most important aspects for investors are to consider at the moment in the responsible investment space?
Campbell: I think the most important thing you have to consider and I hear this a lot when you start to engage it a little bit more corporately on investment opportunities and investment strategies. They say, "You may be giving up the opportunity for an economic return." I think what they've really got to focus on is the long tail risk, and the impact on the investment when a company they're invested in gets these things wrong. We've seen it in mining, we're starting to see it in the services industry and things and clients, consumers and people who are partners are just saying, "Sorry, that's not good enough."
The profound impact upon market capitalization, revenues, and that business are significant. That doesn't mean, of course, that you then just drop the company like a brick and I really like the way Aberdeen Standard Investments and many other firms then engage with companies when they have these issues to make sure that they remedy them because, let's be honest, if there is a supply chain issue in an emerging country, it's going to have some unintended consequences if that company suddenly closes its operations there as opposed to remediate the issue, and make sure they fixed and adopt acceptable standards.
I think it's better to work with these companies in those situations to change their behavior, because at least then you can avoid some of the unintended consequences. To me, it's being long-term, it's thinking about the downside if you're not invested with the right opportunity. When these issues come up, it's about remediation and changing behavior as opposed to just simply walking away.
Amanda: I think some of those points will really resonate with our listeners who are engaged with responsible investing. In previous podcasts, we've asked guests about what they're reading or watching at the moment that they find particularly inspiring. Things are happening around us all the time, and there are books, novels, programs that really get you thinking. Do you have any recommendations that you may have for our listeners, that may provide further food for thought on current state of the world and how social issues are affecting the way we work or invest?
Campbell: There is this wonderful person I know called Amanda Young whose podcasts are just unmissable. I think it's been so long the bow with every day on various devices in various apps and various conference calls. I try to avoid looking at the iPad or watching television most nights. I'm reading a few books at the moment. I'm reading a really interesting book on How to read water. Now you're going to think that is absolutely weird, but what it is it goes back to the Polynesians and how they could navigate across the Pacific by being better attuned with their environment and the stride of the water.
There's lots to learn growing up in Australia and being in a country where there is a lot of native Australians. It was amazing to see how attuned those people are with their environment. I think the opportunity that COVID brings is us getting back to some of those basics and thinking a little bit more about those profound and very ancient things about being respectful and watchful of the environment in which you live. How to read water is fascinating, and of course, one or two other novels are on the go.
I picked up The leopard again recently. I was touched by that because of course, it's about the island of Lampedusa in the Mediterranean. Of course, there's a major migrant issue happening there at the moment, it being the closest part of Europe, I believe, to the nearest shipping off point. That's a fascinating book as well.
Amanda: Well, both of those sound really interesting and How to read water certainly, the title is quite captivating. Now, we're coming towards the end of our time together and I'm very grateful that you have given us so much of your time. What I'm quite keen to do is look to the future. What do you think Responsible Investment will look like in five years’ time?
Campbell: We get engaged with some of the largest asset owners in the world. If you look at some of the signatories to some of these various initiatives, the top 500 investors that are signatories to many of these initiatives, we have relationships with almost 300 of them. The chief investment offices and the chief executives of these firms are really starting to do very practical and meaningful things to make sure that companies address carbon emissions, antislavery, and really important things of that nature. I just think the trend is going to accelerate. Secondly, I think people are going to start to understand, having started seeing more of these events that it's more about risk than actual returns.
I think we're starting to see that post-COVID or through COVID, those companies that embraced a better outlook and kept their eyes on these important things like environment and social issues, have actually performed better than those that haven't. I think we're going to see an acceleration, we're going to see more meaningful engagement, and lastly, we're going to see more standardization and clear understanding.
Things like greenwashing will be a thing of the past and people will be ensuring that the way they invest, taking these considerations into account is absolutely totally integral to the investment process. If you can't prove that that's the case, then regrettably, you're just not going to get the great honor of managing these assets and making not just an economic impact, but a wider social and environmental one as well.
Amanda: Campbell, thank you so much for giving us your time to chat today. As always, it's been an absolute pleasure to talk to you. Before we end, is there a final message you would like to share with our listeners?
Campbell: Yes. I think it's here. It's working. There are firms that are able to not only invest for a great economic return for you, but also, invest wisely for wider returns that will have profound impacts and then the way we live, the way we consume, and more importantly, what we leave for our children and theirs.
Amanda: Well, thank you very much.
Campbell: Thank you.
Amanda: Now, that ends our podcast for today and we're really grateful for you tuning in and listening. Please do listen to our previous podcasts with our CEO, Keith Skeoch, and Eva Cairns, who leads our climate change work at Aberdeen Standard Investments. Look out for our next episode on the ASI website or wherever you get your podcasts. Until then, goodbye.
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