It seems not a day goes by without someone in the investment world talking about the importance of Responsible Investing (RI) and ESG issues. But what do these actually mean? And why should investors care? To help answer these questions we've gone straight to the top – Keith Skeoch, CEO of Standard Life Aberdeen. In Episode 1 of our series, Amanda speaks with Keith on a variety of issues, from what RI means to him personally to the challenges – and opportunities – we will all face in the difficult years ahead.
Amanda: Welcome to today's podcast, the first in our Responsible Investment Podcast Series. We are recording this during lockdown from people's homes today. I have the absolute pleasure of hosting Standard Life Aberdeen CEO, Keith Skeoch, to discuss responsible investment matters. Now, for those who don't know, Keith has had a long career in financial services starting out in broking at James Capron, HSBC before joining Standard Life Investments.
Now, outside of running our firm, Keith enjoys films and fishing. During this podcast today, I'm really keen to explore with Keith, his personal views of the importance of responsible investment. I'm sure listeners will also be keen to hear a CEO's perspective of some of the challenges executives face in embedding responsible business practices into an organization. Welcome Keith, it is absolutely fantastic to have you here today.
Keith Skeoch: Thank you, Amanda. It's a pleasure to be here. Thank you for the invitation.
Amanda: You have long been an advocate of responsible investment activities, strong governance, and the integration of ESG issues into our investments. What was it that made you realize that these things were important for investors to focus on? Was there just one defining moment, or was it a more gradual realization?
Keith: I think it was built up over a long period of time, and a realization that actually societal attitudes and how you behave, sometimes is just as important as the financial numbers. I guess as somebody who started their career, as you say, back in the 1980s in the middle of a deep recession, it was clear to me that those people and those companies that did well in the recession and survived and thrived, actually had a much broader agenda than just looking at the plain financials.
I have long been an advocate of, well, I guess you would refer to as stakeholder capitalism, and long recognized that, for companies and organizations to minimize their medium to risk, they really do need to pay profound attention to the way in which they deal and deal well with all of their stakeholders, customers, people, the communities you operate in. That's how you build reputation and brand, and ultimately that's what makes business sense because it delivers a competitive advantage for the organization.
Amanda: Absolutely. I'm really keen to understand on a personal level what responsible investment means for you and how you see that fitting in with our purpose as a business where together we can invest for a better future?
Keith: I can take that at several levels. One is, as somebody who over the last 40 years has been involved in many financial crises and seen a few recessions along the way. One of the things that I've observed is that responsible investment and the steely steps towards getting it done, are forged in the fires of very often recession and corporate failures.
It's important we learn those lessons and anything that I feel I can do at a personal level, either through leadership at Standard Life Aberdeen, leadership through the Investment Association and the industry to promote responsible investing, is really very important. Certainly, when I look at my own personal portfolio and I'm probably a lot closer to retirement at the age of 63 than many people, actually the sustainability of the return that attaches to the investments is very, very important.
It is something that both at a company level and an industry level, and actually in terms of the way in which I look at my own investments, it's important. The other thing is, it needs to guide your behaviors as well as leaders. People very much look at what you actually do and how you make them feel so responsible investing is something which is part of my DNA, and part of Standard Life Aberdeen's DNA.
Amanda: That's really interesting because it brings me on to your unique position as a CEO of FTSE 100 company. What do you think in this position the key challenge is and areas of focus should be for CEOs and promoting responsible business practices?
Keith: First and foremost, take your people with you. There is a lot of evidence that clearly shows that values and purpose within a firm only becomes a reality when there is buying from all of the people involved. That's the way in which through behaviors you map actions with reality, so we have to demonstrate that we are doing this.
As a CEO of an asset management firm, for sure, we look to hold others to account, but it's important also that we look to operate ourselves to the higher standards. Whether that's us playing our role in generating sustainability, taking on the climate challenge, and thinking about de-carbonization or making sure that our own governance standards are a beacon for best practice.
I think one of the other challenges from the CEO perspective is, in a world that's rapidly changing, changing behaviors and embedding culture takes time. Actually, you have to speak of this with a degree of resilience when many people are just looking to expect relatively rapid improvements. This is something that needs continual attention and needs continually looked at.
Amanda: You just mentioned climate change and it's a strong area focus for us, but it's obviously also quite an obvious topic for discussion. I'm actually quite keen to get your view on what are the areas beyond climate change you feel are important for investors to look at at the moment?
Keith: Clearly given where we are with COVID, the attitude of companies to their people and the way they provide support for their people. There's an awful a lot of emotional stress and strain that's leading to mental health issues that we need to pay a lot of attention to, particularly as we work through lockdown and we think about the return to work.
I think something that will emerge over the course of the next 18 months as we start thinking about how we utilize our clients and say, "There's capital to promote a good recovery." There's going to be an increase in emphasis on the partnership that needs to take place between the government and the private sector. That as an industry, asset managers need to be seen to be operating absolutely in the client's best interest and doing our fiduciary duty.
If we do that in a responsible way, then actually we can do some common good, and I think that's absolutely essential to rebuilding trust in the financial sector. There's nothing more important at the moment in my view in taking savings and turning them into investments. That will help people lead better lives and have better retirement with financial security, and it will also promote a better and sustainable economic recovery that will promote jobs and enhance growth. If we do that well, we can try and do our level best to minimize the amount of economic scarring that's inevitably going to follow the deep recession that we're staring in the face at the moment.
Amanda: COVID has been a challenge for us, but one of the things that has certainly kept me going and I know other people, my colleagues have mentioned this as well, are your weekly emails to everybody at Standard Life Aberdeen. It's great to receive those. As a bit of a film buff yourself, you've also asked us, your colleagues, what box-set suggestions we might have for you. I was quite keen to get a sense of what suggestions you've had and maybe what your favorite is so far and why?
Keith: I've had tons of suggestions, for which I'm phenomenally grateful. I think the ones that kind of come out of the top of the list are the Crown, the Bridge. A touch of Scandi Noir, and Cardinal seems to have cracked up the ranks. The Bridge, I think I had seen. Cardinal, I think is fascinating and we're moving into the second series. I'm extremely grateful. I've got to say, if I look across all the hours I could spend watching these box-set, I'm not sure there are enough weeks left at the moment. It's been fantastic to see what people are talking about. If anybody hasn't seen it, one of my favorites on Netflix is called, The Horn. It's about mountain rescue helicopters operating round the Matterhorn. It's absolutely fascinating. I'd highly recommend it. These are people doing a really, really responsible job and having a profound impact on people's lives at a time of maximum stress for them.
Amanda: Oh, those are really helpful. I've certainly jotted them down. If I get a chance looking after my small person, I will certainly take a look at those. Thank you for that. We're coming to the end of our podcast and I just wanted to really get your views on my final question. We're looking to the future. The future is uncertain. Who would've expected we'd be in this situation six or eight months ago. Looking to the future, what do you think responsible investment will look like in say five years time?
Keith: I would hope that term 'responsible investment' will have disappeared. Actually, I think it'll look like investment, and it'll be so embedded in people's investment processes. The way in which people think about a good return and a sustainable return over the long run will be generated that actually we won't talk about responsible investing.
Actually, we'll accept that doing things in a sustainable way actually does take account of all the risk factors that, Amanda, you and I, look. I'm hopeful and I have to say optimistic after '19 and '20, that we're through the tipping point and responsible investment will become synonymous with just investing. If we can do that together, then we really will be investing in a better future.
Amanda: Keith, thank you so much for giving us your valuable time to chat today because I know how busy your diary is. It really has been such a pleasure to have you on our very first podcast, so listeners, that ends our podcast for today. We're hoping for a great lineup of people across the business to following Keith's footsteps to discuss responsible investment issues, how these fit into their roles, the insights, the views, opinions and, perhaps we can get a few more box-set recommendations as well. Thank you for listening, and do watch out for our next episode and tune in then. Thank you very much, Keith.
Keith: Amanda, no. It's a big thank you for me, for the opportunity to come and talk on this podcast. A really big thank you from me and everybody that's involved in responsible investing at Standard Life Aberdeen and Aberdeen Standard Investments. I think my main message is, keep up the good work because we're making a difference, and together, I think we are investing in a better future. Thank you.