Agenda item
ESG and Impact Investing - Tower Hamlets
A presentation by Goldman Sachs.
Minutes:
Mr David Thomas, Ms Clare Hedley and Mr Jonathan Orr from Goldman Sachs Asset Management made a presentation on their ESG and Impact Investing strategy.
Mr Thomas introduced the presentation before Ms Hedley explained the ESG strategy used by Goldman Sachs. Ms Hedley said there was an increasing awareness of the global effect of climate change, be it plastics in the ocean or forest fires in California or Australia. She said that due to this tide of popularism, the way businesses are investing is also changing. She said there were two themes leading to sustainable growth; (1) Climate Transition, such as investment in clean energy, waste material, eco systems services and timber and (2) Inclusive Growth, where investment is made for the betterment of more people, such as affordable healthcare, education and communities.
Ms Hedley said the current trend was driving efficiency and innovation and was making it more attractive for investors to invest in ESG products. For example, renewables had become more attractive than fossil fuel. She said ESG Investment had become a core part of Goldman Sachs business as this is what investors wanted. She referred to slide 6 of the presentation and said different clients were at different stages of the journey and therefore it was useful for clients to think about how they would anchor their investment portfolio as part of the investment framework.
In response to questions from Members the following was noted:
- Councillor Wood referred to slide 20, ‘Process for building an ESG Enhanced Fixed Income Portfolio’ and said that as politicians, the Committee needed to think in detail about the types of areas that it wanted to invest in. Councillor Wood referred to the table therein and limiting defence expenditure at 4% GDP. He said this would exclude countries such as Israel and the Ukraine. Councillor Wood asked if as investors, one could pick and choose which option or fund to invest in? Mr Thomas responded and referred members to slide 13 and said there were several options available. He said the integrating of ESG factors into the fundamental credit analysis and portfolio construction were key in driving better investment performance. Mr Thomas said managers should be picking the right credits for clients and should take client direction when aligning ESG investments, so that they meet the client’s climate and social goals. He said they had the tools at their disposal to build portfolios to tailor client expectations.
- In response to if a tailored portfolio would result in additional costs, Mr Thomas said the active choices made would mean there may be less options in terms of which companies to invest in but that needs to be balanced against the yield. In terms of fees charged by the asset manager, Mr Thomas said these would not change significantly. He said a more in-depth discussion was required to explain the options available.
- In response to how Goldman Sachs would assist in pushing forward an ESG agenda in renewables and infrastructure, perhaps more so than the London CIV and potentially independently of other councils, Ms Hedley responded stating they had been working on these themes for some time. She said they did most of their work in private markets, accessing investment through real assets, private equity and credit. Ms Hedley said they had acquisitioned a team called Imprint Capital, about 5 years ago who looked to build portfolios reflecting impact growth and had developed eight themes that broadly map to climate transition and inclusive growth. Ms Hedley said detailed research had assisted them in developing packages with the right entry points into the markets to achieve the correct rate of returns, so clients were not investing in something too risky or so mature that it was efficiently priced.
- Mr Jonathan Orr, from Goldman Sachs updated members of the Committee regarding the current performance of the Goldman Sachs fund in which Tower Hamlets is invested.
The Chair, Councillor Kyrsten Perry thanked Mr Thomas, Ms Hedley and Mr Orr for their presentation.
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