We believe that environmental, social and governance (ESG) factors must be considered across asset classes. Incorporating ESG factors throughout the investment process helps us to better manage risk for our clients and contributes to long term performance. We also support initiatives that seek improved corporate disclosure, which in turn empower investors to make more effective evaluations of risk and return.
We consider ESG factors alongside other factors when making investment decisions because they can affect risk and return. For example, we can evaluate how our external fund managers have integrated ESG into their management processes. In our direct investments, including infrastructure and real estate, ESG factors are evaluated, where applicable, in the due-diligence process and monitored over the life of the investments.
The Role of Engagement
We believe that being an engaged investor reduces investment risk and contributes to enhanced returns over time. IMCO discusses ESG concerns with corporate boards and management teams. We collaborate with other institutional investors to have a more pronounced impact on ESG practices, such as advocating for improved corporate disclosures. We also participate in domestic and international discussions regarding standards and best practices in responsible investing.
Our View on Climate Change
We consider climate change in our investments because we seek to create long-term value for our clients. It is particularly critical for IMCO to understand the climate implications for assets that we intend to hold for a decade or more, such as real estate and infrastructure.
Risks to companies and investors include regulatory changes, physical impacts including extreme weather events (fires, drought, flooding, hurricanes) and rising sea levels. Opportunities include developing cleaner energy sources, energy efficiency and adaptation measures.
As a long-term investor, IMCO wants to see predictable global regulations to address climate change and more extensive climate-related disclosures from companies. Clear regulations and relevant company disclosures help us to assess the risks and opportunities in the transition to a lower-carbon economy.
In 2018, we signed the Global Investor Statement to Governments on Climate Change, which called on world governments to: achieve the Paris Agreement’s goals; accelerate private sector investment into the low carbon transition; and commit to improve climate-related financial reporting.