Castlefield Investment Partners has been stepping up its engagement this year – from voting against auditors that fail to mention climate risk to voting against the re-election of certain sustainability committee members at financial institutions that are continuing to fund or insure new fossil fuel projects, Ita McMahon, partner at the firm, told PA Future in this Green Dream video interview.
She also discussed her thoughts on the latest SDR proposals and the firm’s training for the anti-greenwashing rule, how the Nestlé resolution outcome was a positive step and the firm’s work with the Food Foundation.
Watch the full video interview above and read the transcript below.
NK: Hello, and welcome to the Green Dream. I’m Natalie Kenway, and today I’m joined by Its McMahon, who is partner at Castlefield Investment Partners and also a member of the PA Future Committee. Thank you so much for your time today. So where are you calling this from?
IM: I’m calling from our offices in Manchester and we’ve got some we’ve got some nice weather today, which is quite fantastic.
NK: That’s what we like to hear. We’ve had some recent announcements around the SDR, the Sustainability Disclosure Requirements from the FCA. I wanted to ask you about what your initial thoughts on that, around the extension to portfolio management and some more guidance around the anti-greenwashing rule as well.
IM: Yeah that’s right. So we’ve had that recent announcement, and broadly we are very positive about that and welcome the extension of that scheme or the proposed extension. And I think that it will really help, the conversations that clients and advisors have, because those conversations can now be centred on common definitions of sustainable investing. And that’s got to be a good thing for clients.
More generally, we’ve had some clarity now on the anti greenwashing rules, and the deadline for implementing those. We’ve been working on the basis that the draft rules are the final rules and the proposed deadline is the actual deadline. We’ve been doing that internally for some time now. So we’ve had a project underway involving our compliance and marketing teams to check all externally facing material to make sure any sustainability related claims can be substantiated.
We think we’re we’re on solid ground there, we hope we are anyway. And then our compliance teams also be putting together some training material so that we can train all staff internally and prior to the 31 May deadline to make sure that there’s a broad understanding of what these rules mean and what they mean in practice for people in their roles.
NK: Okay, great. Well, it sounds like you’re really on top of things. We’ve heard that some groups have been rushing to meet this 31 May deadline. So yeah, it’s great that you’re thinking about training and all of those different aspects of SDR that are coming in by then. Let’s talk a bit about engagement and voting. what sort of trends have you seen so far this AGM season? Are there any more successful ESG resolutions going through this year?
IM: We’ve recently had the Nestlé AGM, and we’re not holders of Nestlé but we have followed, developments there quite closely.
And I think that, resolution got about 11%, approval, which although on the face of it doesn’t seem very high, it does still represent 10% or a 10th of the shareholder base, which is not insignificant. Moreover, there’s been widespread coverage of the AGM and of that resolution and that coverage has extended beyond the financial press and into more mainstream publications like The Independent, and The Mirror, and so on.
Those that are behind that resolution will count that PR coverage as a win. Let’s see what they do sort of next year, if they could take that forward and if they can get a broader base of support. in terms of our own voting, we’ve been trying to do something a bit different this year.
We have for some time already voted against the reappointment of the auditor at companies where the annual report and accounts doesn’t mention climate risk. And we’re taking that one step further this year, and we are voting against the reappointment of certain directors at companies like banks and insurance companies, if they are continuing to fund or insure new fossil fuel projects.
We actually don’t have that many companies that fall into that camp. But where we do have holdings, we have been exercising the right to vote against the members of the sustainability committee, for example. That’s something new we’ve been doing at our end.
NK: That’s super interesting, and please keep us informed on how those go.
In terms of engagement again, are there any new tools emerging that asset managers are using? I know you speak to asset managers, all of the time. So are you seeing some new trends on that side of things?
IM: The Iris Foundation co-hosted a webinar a couple of months ago with the Responsible Investment Association of Australasia, and they’ve developed a new toolkit to help investors think about their exposure to companies that are active and present in conflict zones.
That toolkit is is excellent, actually. And I wish we had it in place a year or two years ago. And, but given the current news and given the situation in various parts of the world, that’s a really welcome tool for the investor community. I hope that awareness of that toolkit builds because I think it’s it’s a really good, good addition for us.
The other thing that we’ve been doing that’s new and interesting is that we have joined an investor group that’s run by the Food Foundation. The Food Foundation wants to see food companies reporting more on the nutritional profile of the products that they make and what lots of these investor coalitions do is that they go and talk to companies directly and ask companies directly to improve their reporting.
But the Food Foundation have taken a different tact, and they’re actually going directly to policy makers and trying to get mandated reporting introduced through a policy route instead. So, that’s been a really interesting piece of work to be involved with. And it takes a slightly different approach to some of the, some of the other initiatives that are out there, like CDP and the Workforce Disclosure Initiative.
NK: Food is very much a big theme this year. quite a few asset managers launch funds specifically focused on that theme. And also, coming back to your your points on Nestlé earlier, ShareAction said at the time of the outcome of the resolution the direction of travel is clear, investors are talking about this, and that’s a sign of progress in itself.
Talking of progress, we have seen since last year people talk about next iteration of ESG or sustainable investment, that it’s maturing, that it’s growing up. Castlefield have been doing this for a very long time. So what’s your stance on things? Is this the industry moving into the next step or is it a case of investors starting to understand the nuances of sustainable investment?
IM: So what’s really interesting, Natalie, is what we have seen over the years, different sectors go through this very process of having to formalise what they mean by sustainability and come up with frameworks for demonstrating progress around sustainability.
Food and drink companies, for example, they’ve had to develop things like the traffic light scheme that goes on front of pack to talk about the nutritional content of their food. We’ve had high emitting companies having to kind of report in more detail around their each of their Scope 1, 2 and 3 emissions.
Basically, it’s now time for the sustainable investment community now to go through that process. And that’s why we’re seeing things like the labeling scheme coming into effect and the anti-greenwashing rules come into effect. I think it is a sign that we’ve been dabbling in this area for some time now, and it’s time for a common set of rules and a and a common framework.
And I do hope this maturity will lead to more detailed conversations with clients and with others around the holdings that we have in each of our funds, and what the sustainability metrics are of those companies, but also what work is left to do within each of those companies, so that we can have not just a blanket off oh this is great and all the companies we hold are great, but more of a conversation around how we’ve picked these companies because they’ve got these great sustainability characteristics.
But on the other hand, there’s still lots of work for these companies to do in this area, in this area and this area, and that’s where our engagement program kicks in. If we can start to have a more sophisticated conversation of that nature, then that’d be a really good thing for us, and for clients too.
NK: Yes, I completely agree. And hopefully coming back to our first question around SDR, I think once that really kicks in, we will see more groups talk about this with a bit more confidence and understand where they are at with the the labels and the different frameworks.
We always end the Green Dream with this question. So what is your favourite sustainable drink or snack?
IM: I’m notorious in the office for my tea drinking, so I think I have to say my favourite brew. And that’s Clippers Fairtrade regular tea
NK: Fantastic, and who doesn’t love a cup of tea especially in this weather. Thank you so much, Ita, it’s been great to chat with you.
IM: Thanks so much for the invitation.
