The PPF’s Claire Curtin: “The social aspects have potentially suffered at the expense of a narrow-minded focus on climate.”


23 Nov 2023

The Pension Protection Fund’s head of ESG and sustainability sits down with Andrew Holt to discuss the changing investment universe, stepping out of the E’s shadow, the option of last resort and not knowing everything.

The Pension Protection Fund’s head of ESG and sustainability sits down with Andrew Holt to discuss the changing investment universe, stepping out of the E’s shadow, the option of last resort and not knowing everything.

How has ESG and responsible investing changed since you joined the Pension Protection Fund (PPF) in 2018?

I joined from an ESG data provider where I spent years convincing pension funds and asset managers that ESG is critical. Having seen a slow take up, the launch of the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 saw a massive shift in the industry, and not just around climate.

UK pension funds have also seen measurable change in their reporting thanks to regulation. This is the oversight that we, as an asset owner, should have.

That is probably one of the biggest changes I have seen: that expectation, particularly from larger asset owners, about what we should be doing to continue overseeing and standing by our values and commitments on ESG.

Has ESG grown in importance as an issue during the past couple of years, or have you seen a gradual change?

It has been gradual, and definitely not linear, but suddenly in the last two years we have seen a big pick up. The number of organisations involved in working groups has significantly increased. The sheer numbers of attendees at the responsible investment roundtable we join forces with quarterly has grown. And that’s mainly been in the last couple of years.

I would have struggled to have a detailed conversation with some of these groups two to three years ago, but we have much more thorough conversations now.

What is the PPF’s approach to ESG and responsible investing?

We have been thinking about responsible investment pretty much since our inception. That’s the benefit of being a younger organisation, you can adopt things from the start.

We were an early signatory to the Principles for Responsible Investment (PRI), and those founding principles have been key for many years. That focus has been on the integration of ESG and thinking about materiality, so that helps emphasise our strategy. We are thinking about the material risk, but also the opportunities.

And with that, our focus tends to be more on engagement and trying to improve a company’s practices, rather than shifting to a divestment decision. That would be a last resort for us. And driving change in the real economy is what we are trying to push with all of this.

Have you ever implemented that last resort?

We have, in a few specific areas where we feel from a financial perspective that it’s no longer a sustainable business. We changed our equity benchmark a couple of years ago and removed a few companies.

From a financial perspective, there wasn’t going to be a place for coal in the future, so we started to reduce that exposure.

Do you have something like a three strikes and you’re out approach?

Yeah. We have been working on a formal escalation policy. That’s going through our committee approval process and means we can be explicit about the steps that would be needed to progress to that level.

Your climate change report highlighted the many successes of your ESG approach. What were the main findings?

This is our third climate change report. The evolution of the report tells a story. The first was just a narrative, it was the start of the journey. I look at the report we’ve just published and we are reporting progress, putting more quantitative data and visuals into it, which is great to see. That in itself is a kind of success: that we’ve been able to show that evolution. We have tried to include a number of real life examples of our work.

More widely is the work we’ve been doing on our portfolio alignment assessments. Which again, it is something that has taken a couple of years. It’s a multi-year process, and we are definitely not done yet. When we started there was little out there publicly that we could apply to the types of assets we had. So we had to build a lot of assessments, or make a lot of assumptions and decisions ourselves and try to use data as much as we could.

In the portfolio, what we hold in this asset class is to make it relevant to us rather than a broader top-down assessment, as that is time-consuming, resource intensive and involved lots of debate.

We are starting to see the progress we have tracked over the last couple of years to where the overall distribution of the fund is. It’s great to see that.

We have seen an increase in the assets that we can classify as aligned with Paris [Accord] and net zero, but also, coupled with that, a decline in assets that are not aligned. It is not that we have made sizable shifts in the portfolio. The equity benchmark is something we [changed] a couple years ago.

It’s about supporting our engagement, rather than a divestment argument, and showing that change. We created a climate watchlist because we cannot monitor everything. This is more than 80 companies and accounts for a substantial amount of our financed emissions in our listed assets. By prioritising our efforts, we can track the progress of those companies.

Why have you set such high responsible investment targets?

A lot of what we’ve communicated has been driven by the organisational sustainability strategy we published in the summer. We have tried to leverage our development of that and think about who we are as the PPF, the uniqueness of us and our position within the industry, who we work with, partner with, and how we operate.

That’s been a real focus for us: thinking about not just sustainability, and not just environmental sustainability, but also the social aspects. Part of our diversity and inclusion strategy is how we utilise our human capital, while also engaging with our stakeholders.

With net zero in particular, the big challenge is how do we achieve [the transition to net zero] in our direct operations, but also how do we achieve it in our supply chain? Before we can see real change, we’re going to need more data.

And we’re hoping that by talking about it and getting involved with other groups trying to address the same problems, that together it becomes a more comprehensive ambition.

Are you on target with all your ambitions?

Yes. Some of these things are going to take three to five years, or perhaps even 10 years to move towards.

Are there areas where you want the PPF to improve in terms of responsible investment and ESG?

We don’t have all the answers. We haven’t got it all signed, sealed and delivered. But we want to be more open, sharing the challenges and obviously accept that most people are going to be in the same boat as us. We found that collecting data to report more on Scope 1, Scope 2 and Scope 3 emissions is a challenge.

What are the key initiatives that you feel have shifted the ESG narrative?

The TCFD was absolutely a game changer globally, but the European Union’s Sustainable Finance Action Plan has shifted the reporting and the transparency of our European managers.

It’s not just thinking about climate as an E issue, but also the social and economic impacts. The just transition narrative has been critical and will be even more so as we start thinking about what it means in emerging economies. Being involved in a transition that creates jobs and levelling up will lead to a better real world outcome.

Where are the ESG failures on an industry, governmental or supranational level?

It is probably quite topical in the UK. That centres around the time-horizon issue. The focus on cost now, versus costs tomorrow, and then what is driving decisions that get made.

It’s definitely a challenge. We are seeing more at the governmental level globally. But even this is a much broader problem than just what one country will face, and that fairness aspect is always going to be incredibly challenging.

The failure is also possibly more around the way it’s being positioned: just focusing on costs and not focusing on the benefits or opportunities.

What have been your biggest challenges in your role and how have you dealt with them?

The sheer breadth of issues and areas that now fall under the ESG-sustainability umbrella can be overwhelming. The ongoing data challenges alongside that standout.

I’m someone who always wants to know more. I always have a desire to know more, to learn more, to understand more. But then you have to prioritise. So the way I deal with it is to have a subconscious re-prioritisation going on in my head. Alongside that, I need to have patience. Things take time. None of this stuff is going to happen overnight. So it is about being pragmatic as well.

Have you ever felt being a woman in investment has been a barrier in your work? Have you experienced discrimination?

I’ve always been aware of the imbalance in the industry. The diversity element has been talked about for the 23 years I have been in this area. Of all the areas in asset management, ESG is probably the most diverse and I don’t know what has led to that. But potentially, I guess the diversity of issues within ESG has a part to play.

What can the industry do to achieve more on the social side: both when investing and bringing more diverse people into the industry?

The social aspects have potentially suffered at the expense of a narrow-minded focus on climate. So we have been quite heavily involved in the DWP’s taskforce on social factors and looking to see it build guidance for asset owners to think more about that side.

It is hard to demonstrate some of the benefits from taking a social lens within the investment consideration. Less data makes it harder to track or even to prove. A great deal of research tells us much about more diverse teams having much better productivity. And having a more socially diverse group of people is critical.

We are looking at it across our recruitment practices. It is crucial to broaden people’s minds around the importance of getting a broader mix of people.

Why has the social side been relegated below the environmental aspects of ESG?

I don’t know if it is one particular thing. You can only deal with deep diving on one area at a time. But it is the data aspect as well. It’s a lot harder to standardise. You have to get into the nuance of knowing what’s going on.

What have been the biggest lessons you have learned in your career?

The main lesson is being brave, being open to change, to new themes and new ways of doing things. Alongside that, a thirst for learning and to continue developing yourself. You never know everything.


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