Engagement and divestment should not be seen as opposites, but as “complementary” strategies, CCLA head of sustainability James Corah has insisted.
He told Money Marketing that engagement should not be used as an excuse to invest in companies which are impossible to engage with.
“There are some companies that fundamentally will not respond to engagement,” he said. “You’ve got to try but, if it doesn’t work, then you have to divest.”
He said there should always be a “continuum” between engagement and divestment.
Corah said the whole point of sustainable investment is to “drive outcomes”.
“Sustainable investing shouldn’t be a style of investing, it should be a movement. It should be about how you use your assets to drive change.”
He suggested this is why the Financial Conduct Authority’s Sustainability Disclosure Requirements (SDR) are “really helpful”.
“They say you don’t just have to buy a specific sustainable thematic fund.”
The FCA published its SDR policy statement in November last year, in an effort to improve the trust and transparency of sustainable investment products and “minimise greenwashing”.
Greenwashing is defined as the act of “making people believe that your company is doing more to protect the environment than it really is”.
The statement includes the introduction of four labels introduced to sustainable funds, instead of three: ‘sustainability focus’, ‘sustainability improvers’, ‘sustainability impact’ and ‘sustainability mixed goal’.
Corah said he believes the rules will “unlock the potential for sustainable finance”.
“If you look at the way the industry has done it until now, it’s been all about clean portfolios. It’s been about trying to maximise investment returns from particular opportunities.
“It hasn’t really had that sense of doing good with your money in a way that I think clients have wanted.”
