Green Dream with Victory Hill’s Fraser-Smith: Investors don’t ask enough questions

Eleanor Fraser Smith says she’s frustrated by the lack of questions on impact and stewardship


In this Green Dream video interview, Eleanor Fraser-Smith, head of sustainability at Victory Hill Capital Partners, urges investors to ask tough questions about the interconnected nature of the global transition, and explains the investment opportunities in carbon capture technology.

Watch the full video interview above and read the transcript below.

MN: Welcome back to the Green Dream video series. My name is Michael Nelson, and today I’m joined by Eleanor Fraser Smith, head of sustainability from Victory Hill. Nice to meet you.

EFS: Nice to meet you, too. Thank you for having me.

MN: So previously, you’ve spoken about the need for investors to ask tough questions. What kind of questions are Victory Hill being asked at this point in time?

EFS: I think that’s where my frustration comes from, because I’m not. I’m not asked very many questions. We go to meet a lot of investors and I don’t get a lot of questions about impact and about stewardship. We spend a lot of time talking to our investors. Our strategy’s a little different because we don’t invest in one technology and one place where technology is diverse, we’re looking at the whole spectrum of energy transition and we’re also globally diverse. So there’s an awful lot of conversations that we have about our strategy and our objectives and the impact we’re trying to have. But I don’t get the kinds of questions I think I should be getting.

I really do feel there is this carbon tunnel vision and this focus on emissions. And, you know, there are 16 other Sustainable Development Goals which are all interrelated and can have an impact on them, or they can have an impact on you, and I think we should be thinking more broadly.

I would like investors to really join up the dots, to think about the interconnected nature of all of this. If we’re investing in renewables, like, for instance, a solar farm somewhere, I want them to ask about how we’re managing biodiversity issues in mining rare earth metals. I want them to ask about labour rights in our supply chain, about land use changes, about end of life management, because if you don’t ask these questions, you’re not getting the full picture. And some of those questions are challenging because there really are sustainability trade-offs in a lot of these investments. But if you don’t ask the questions, you’re not going to be able to move the needle. You’re not going to make the change that you’re trying to make.

MN: Recently, ESG Clarity spoke to economist Trevor Williams, who emphasised the focus on carbon emissions, and we’ve also seen the fallout around The Economist‘s article, which said ESG investing is just about emissions reduction. Why are you against that idea?

EFS: Oh, I think it’s a horrible idea. I think if you just focus on emissions reporting, then it becomes a compliance exercise. You end up ticking the box, you end up reading reports with people virtue signalling and giving the illusion of progress, and nothing’s actually happening.

I also think there’s a complete misunderstanding about ESG. I mean, it’s not impact investing. ESG is a risk management framework. You have to understand what your material environmental and social risks are – and opportunities, because there’s a value creation opportunity there – because that’s our fiduciary duty. Investors expect us to understand what our risks are, and that’s not impact, that’s just good business.

It comes back to asking questions. Investors should be asking what are your material risks – environmental and social risk – and how are you managing those? Now, if you’re really interested in emissions reduction and what companies are doing on that, you should be asking, well, what’s your transition strategy? How are you transforming the business to this new world of low carbon? Which is, I think, completely different.

MN: Victory Hill are one of the few funds that focus on investment in carbon capture, which the UK government are emphasising as part of their strategy going forward, but scientists debate the viability of it at scale. What opportunities are you seeing in that space? And also what other interesting opportunities are you seeing in sustainability?

EFS: You know, I work with the investment team at Victory Hill who have years of experience in investing in energy projects, so they understand markets and understand the need. And when you look at the UK, we have been hugely successful in integrating renewables into the grid. The opportunity isn’t more renewables, there’s a backlog of renewables to get onto the grid. Our opportunity there is around providing a solution to the inertia problem, to the baseload power problem that you get with the intermittency of renewables. You know, when the wind doesn’t blow, when the sun doesn’t shine, how are you getting that energy? At the moment, they’re switching on the old gas power plants, and the oil and coal power plants. We see the opportunity in providing a very flexible, very efficient gas power plant that can be switched on when that baseload power is needed.

But in addition to that, the carbon capture provides that low-carbon solution. So, some of the the concerns you talk about in terms of carbon capture is around sequestration, because the carbon capture technology has been around for a hundred years. I think if you look at some of the big hard-to-abate industrial plants in the north of England, they’re really looking at how they can do that, how they can capture the carbon sequester it.

Victory Hill doesn’t see the opportunity in sequestration. What we’re doing is carbon capture and reuse. There’s a huge need for industrial gases in the food and beverage industry. So, when you open that soft drink or that fizzy wine or the beer, that carbonate has to come from somewhere. And traditionally, it’s come from the production of fertiliser, which is extraordinarily dirty. So, this is a clean alternative to the carbonate that’s needed. And plus, it’s another revenue stream. So we see big opportunities there in the UK.

We’re also seeing lots of other opportunities. So, you know, in transport, electrification isn’t going to solve all the emission issues there. There’s still going to be a need for some kind of molecule when it comes to that long-distance heavy transport, the marine, aircraft. And I’m seeing some really exciting opportunities in renewable fuel and sustainable aviation fuel manufactured from waste cooking oil, which has got a really low carbon intensity in comparison to conventional fuels. So I think that’s very exciting as well.

MN: The last question is the one we always end on. What would you consider as your favourite sustainable snack or drink?

EFS: Talking about sustainable trade offs, I think, and food is a really interesting one. You know, there’s some really good Fairtrade chocolate out there which says there’s no slave labour in the supply chain, but it tends to come from places like Ghana and Cote d’Ivoire, so then you have to start thinking about airmiles. So, I’m going to sort of cop out a bit and say it’s going to be an apple from my garden because it’s seasonal, it’s tasty, and I know the supply chain provenance.

MN: That’s great. Thank you very much for joining us today.

EFS: Thank you for having me.

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