Engagement in Gear: changing the levers that drive Responsible Investment
David Rutherford is Vice President of ESG Services at NEI Investments, part of Aviso Wealth and Canada’s leading provider of Responsible Investment (RI) solutions. He’s a keen observer of the global finance and business sectors and one of the smartest people we know.
This is Part Two [here’s Part One] of a comprehensive conversation David had with The Works’ Wesley Gee (Director of Sustainability) and Eric Johnson (Director of Strategic Communications). Among the topics we touched on are the way NEI is using engagement to differentiate its RI approach, and how COVID-19 is affecting its corporate priorities.
The Works: In addition to recent pension fund announcements, we’re hearing that RI-focused investors are increasingly moving away from engagement-oriented approaches toward straight exclusion, such as a fossil-fuel-free portfolio. Is this a trend you’re seeing?
David Rutherford: Our team discussed this in December. We agreed that the demand for fossil-fuel-free portfolios is something that we would need to have an answer for in 2020, because it’s what more people want to talk about. And so rather than fight it, we think that the fossil-fuel-free movement can actually help us in our engagement.
The Works: Okay, you’ll have to explain that. How does the fossil-fuel-free movement help you engage with the oil and gas sector?
David Rutherford: Some investors will state unequivocally, “I want to divest of all fossil fuels in my investment portfolio.” This is typically an asymmetrical trade because, beyond divesting, there is no corresponding change to how most people use fossil fuel products. So, I’d say it’s often a quick-and-easy solution to make you feel good about your contribution to reducing carbon emissions. Our view – and what defines our value proposition – is there are no easy solutions. Moreover, there has to be room in the sector that will allow fossil fuel companies to make major changes, to be part of that transition to a low-carbon future.
We dig in on issues with all oil patch stakeholders, not just companies. This is absolutely our approach, and the approach that Jamie Bonham – NEI’s Director of Corporate Engagement – has perfected. We create forums that bring together everybody on the spectrum, from fossil-fuel-free adherents to diehard oil and gas believers. We get them in a room and, rather than provide them with a soapbox so they can repeat their entrenched positions, we challenge them to come up with solutions that are going to work from both perspectives.
The Works: What’s the concrete benefit of getting those wide-ranging views?
David Rutherford: They reduce polarization and allow us to meet in the middle, which is probably a good place for us. Bringing these two perspectives together is essential because no matter how ardently you believe in divestment from fossil fuel, there’s got to be a plan in place to get there. And that plan has to involve the companies who are currently earning their livings, paying salaries, contributing to communities and generating investment returns by pulling stuff from the ground.
That’s why we were pleased to see the federal government offer roughly $2 billion to look after abandoned wells in Alberta. For us, that’s a key challenge that we would have to face in a fossil-fuel-free world: “If you pulled everything out, who’s going to take care of those abandoned wells?” Providing money to address this creates a backstop for a trend that is going only one way: toward less reliance on fossil fuels. This is not about just giving bailout money to companies. Instead, it is money directed at a specific purpose that facilitates the transition to other energy sources.
The Works: Has the pandemic environment affected the way NEI approaches engagement?
David Rutherford: It has. When we saw what companies were doing very early on in terms of making and taking actions in support of stakeholders who weren’t shareholders – for example, employees, community members and customers – we thought that was a great thing. We also recognized that companies were dealing with incredibly difficult short-term issues, including how they can keep people employed, resolve crumbling supply chains, address plummeting stock prices and, ultimately, stay in business.
We had no desire at that time to come to the table with those companies and say, “Okay, but what about your longer-term ESG considerations?” That was not the time or the place. So, we made a pivot, and reached out to companies that were doing the right thing and commended them for that – in writing, all the way to the top of their organizations. We’re setting the table for what our future engagements will look like. The issues we want to focus on, like energy transition, won’t change over the long term. So, when we come out of this, we’ll be in a position to say, in good faith, “Okay, this is how we think you should be operating all the time.”
Look forward to Part Three of our discussion with David Rutherford in July 2020.