69: Stewart Investors' Pablo Berrutti - Bottom Up Sustainability

[i3] Institutional Investment Podcast

Pablo Berrutti is Senior Investment Specialist, Sustainable Funds Group at Stewart Investors. Starting as a risk specialist, Pablo became quickly aware of the dangers of climate change, even before he knew what ESG was. In this conversation, we discuss the likelihood of fossil fuel-based companies making the transition to low carbon business models and pose the question whether companies’ quick retreat from Russia during the invasion of Ukraine is a vindication for ESG. Overview of podcast with Pablo Berrutti, Stewart Investors: 2:00 Becoming aware of climate change as a risk manager 3:00 Missing out on a mandate due to lack of ESG policy 4:30 My questions on climate change led to a role at an SRI fund 7:00 Risk and reward are the two sides of the same sustainability coin 10:00 You have described ESG metrics as ‘colouring by numbers’. You don’t seem a fan of these types of metrics? 12:00 The sin of aggregation 13:00 Companies still have different boundaries in how they measure their carbon footprint, so it is not a generic measure 16:30 We look at fossil fuel companies and we just don’t see how they are able to transition profitably 18:00 We actually like the companies that we invest in and we want them to succeed, so there are not that many shareholder resolution filed at the companies in our portfolio 19:00 Discussing negative screens: ‘For us, they don’t make sense.’ 21:00 On macro events, such as the pandemic and Russia 25:00 It is another example of companies that lead the charge on sustainability can come out of these situations stronger 26:30 Several large, multinational companies pulled out of Russia relatively quickly. Do you see this as a sign that ESG has finally become mainstream? 28:00 Did any of your portfolio companies react unexpectedly during the pandemic? 29:00 Belarusian company EPAM did the right thing and focused on their staff 31:00 Are you worried about the dominance of large technology companies? 32:00 TSMC is one large tech company we can get behind 33:00 Between 2010 – 2019, large tech acquired 819 small companies that were below threshold reporting requirements, see report. 36:00 Are you excited about any particular technologies? ‘Yes, steam’. 40:00 Diversity study with the University of Technology Sydney (UTS) 41:00 Inclusion has to come before diversity 43:00 Sometimes change really has to come from the CEO 47:00 Talking SDGs, three things to look out for whether companies are overstating their contribution to the goals