Today, saving the planet is a sexy job, but what was it like in 1997 when you started working in sustainability?
It was more about compliance and ticking boxes. Back then I was working for a consulting engineering firm doing contaminated site assessments in support of refinancing decisions for financial institutions. That was probably where I got my appetite for the finance sector.
When did you decide that you wanted to save the planet?
It started at university in the early 90s. I wouldn’t say it was a grand passion. I studied psychology, but didn’t pass the bar in my first year.
At that time, Queen’s University started offering environmental science, and I was in the first graduating class. It was a great course and amplified my interest.
I then took a post-diploma in environmental engineering because I struggled with how to apply the course into a real job. As part of that, I did an internship for a consulting engineering firm where I drilled holes and collected groundwater samples. I thought: “So this is how I take all of that academic theory from university and practically apply it.”
That was my foray into working for financial institutions. As part of a buy/sell you have to assess any properties. If there is contamination, it’s taken o its value.
I did that for 10 years, but by 2007, I felt that if I wanted to move up a stage in my career then I should do a master’s degree. So I did an MBA in corporate social responsibility at Nottingham University Business School.
That is when I realised I could take the lessons learned over 10 years, where I was evaluating risk at an operational level, and lift it up to a more strategic level.
Looking at things in a more holistic, macro context is in alignment with my skills. That is what piqued my interest in responsible investment, because I didn’t want to abandon the 10 years. I was in my 30s and was up for a career change, but not a complete career change.
Looking back over your career, is sustainability where it should be by now?
There is an assumption that we have mainstreamed responsible investment. But have we?
What has occurred in the past few years is an explosion of products and services within ESG, but the question I would ask the industry is: have the corresponding beliefs moved with them?
If those products and services are moving in one direction, and your beliefs are not going with them, then they don’t have a solid foundation. So we aren’t able to withstand shocks, for example, like what is happening in the US with the anti-ESG movement.
There have been a lot of people from the mainstream moving into our field. So I’m not saying there hasn’t been advancement, but we need to be honest about the beliefs part of the picture.
You took on this role at People’s Partnership two years ago. Why did it appeal to you?
I was in Spain working with the Association of Member Nominated Trustees (AMNT) on a campaign to address systemic barriers to split voting in pooled funds. That contract ended after four years.
I was pretty disgruntled at that point. I wasn’t able to advance meaningfully in terms of my professional development, because it is important to me that I’m always learning. In other words, I was reaching a plateau.
So I was looking for opportunities in 2022 with a little trepidation, because I had that experience of not feeling fully integrated into the investment team, like the value proposition of responsible investment wasn’t fully embedded.
I was a bit nervous about coming back in, but I talked to a lot of my colleagues in the industry, and they said it has moved on materially enough that the role will be different, and there will be an opportunity to learn and grow. So for that reason, I came back in.
What have you achieved in those two years?
There’s no I in team. We have achieved a lot but could not have done it without the senior management’s support and our wonderful trustees.
In terms of what we have delivered, we integrated climate-aware funds into the developed equities portfolio. It was £15bn and was the single biggest move in the UK at the time for defined contribution. That took about 18 months to process through various governance committees, so it was a huge accomplishment for everybody involved and a professional highlight for me.
The second is updating our responsible investment policy. The core of the update centered around strengthening our expectations of fund managers. That received good industry feedback in terms of its clarity and transparency. I’m quite proud of that policy.
There are many different pillars of those expectations.
First, we look at whether the fund manager is aligned to our responsible investment objectives and beliefs. Then we unpack the governance piece. If it’s for a passive mandate, we look at stewardship resourcing. For example, if there’s board oversight.
Then we look at voting and engagement. We have expectations across our steward- ship priorities of climate, nature and human rights.
So we look at the degree of alignment between those expectations, our net-zero voting guidelines and what our fund managers are doing, to see if there are any gaps.
Then there is the quality of their reporting, because there’s a lot of work that needs to be done here, with respect to getting more granular data on engagement.
There is a whole narrative missing from stewardship reporting: company engagement information milestones, progress against them and what are you going to do if engagement fails. We push our managers to improve in that space.
One of five workers in Britain save with People’s Partnership. Other than an income in retirement, what are you offering them?
One of the differences of working in a large master trust, is a sense of responsibility to that one in five.
I’m keen to show that we have them at the heart of our decision making on responsible investment.
For example, we have completed a You-Gov survey of UK savers. Our intention is to use the findings to shape our stewardship program. Another area of focus is to create more member-friendly responsible investment content.
In other words, our responsible investment policy is technical, but deliberately so, because the primary stakeholders are our fund managers. But in addition to that we want to create a more member-friendly version. A member-friendly version of the TCFD (Task Force on Climate Related Financial Disclosures) report is also coming soon.
You manage £30bn worth of assets. Is it possible to invest such a large amount responsibly?
One of the benefits of where we are in the industry, in terms of greenwashing risk and the anti-ESG movement in the States, is that it will put us in a much more honest place.
Honesty will be rewarded in this new environment. It is taking a staged approach, saying that this is what I’ll be able to do by this time, and this, by this time. It is an evolution, not a revolution. Just being honest that this is a journey, because the goalposts are always moving in terms of data and analytics frameworks.
You are not going to read that we 100% embed ESG into the investment process. This is the kind of statement the industry was making 10 years ago.
Now we are in a much more honest place about what we have embedded into which asset class. It is a lot more rooted and grounded now.
100% responsibly? Perhaps not. As long as you are honest about it being a work in progress and evolving your process over time, you will have more credibility in today’s market than saying we are 100% invested responsibly.
Back to fund manager standards. You once said that the days of “tea and cake” engagement are gone and you want to see a more targeted approach, routed in robust theory. Is that message getting through to your managers?
It’s a bit early for that. It’s a work in progress. It’s just about consistently sending that signal through the monitoring programme. Rome wasn’t built in a day when it comes to these things.
It is a progressive responsible investment policy in the sense of it being stretched, but deliberately so.
What I’m hoping to see is that the conversations I’m hearing in the industry around us needing to take a targeted approach, that’s rooted in a theory of change, will eventually be embedded into the stewardship approach.
This is why I thought it was important for us to root it in the responsible investment policy so that it’s formalised and part of the monitoring programme.
It’s part of how we score the managers on how well they answer these types of questions. It is not something where you snap your fingers and it happens overnight, but conversations are happening.
It is early days, but I can see a positive evolution with respect to it. So let’s talk in three years.
How widespread would you say that misalignments between asset owners and their managers are?
It’s an interesting word, misalignment. It seems to have resulted in some polarization in the industry.
Ultimately, what’s important here is creating a partnership between the asset owner and the fund manager to strengthen that stewardship chain.
If you use terminology like ‘alignment’ it can create tensions, which is not what we’re looking to achieve.
We’re in an interesting phase in stewardship, one of disruption. For years, pre-dominantly speaking, the stewardship proposition was supply-led by fund managers.
What I’m seeing lately is a shift where asset owners are starting to rise in terms of their voice. You’re seeing evidence of that through the new stewardship propositions that are being presented by fund managers.
Another disruptor working in this space is the Task force for Pension Scheme Voting Implementation, which I was on when at AMNT.
Seven years ago, no fund manager was willing to talk about it. Well, today the landscape is an entirely different world, and it’s creating a lot of disruption. People have an issue with it, but it is a necessary evolution to where we need to be as we move towards more of a demand-led industry when it comes to that stewardship proposition.
There will be growing pains along the way, but it’s necessary in order for us to shift this system to a place where it always should have been, which is demand-led with the asset owners at the top of the chain, being the owners of the capital, driving what they need from their fund managers.
What big stewardship issues are you facing?
Where we are failing is we are spread too thin. You just see a heck of a lot of initiatives happening in all sorts of places. What we need to have is that targeted approach.
We expect that of our managers and are clear on the areas we want them to focus on. But what we need to do is share the workload.
There are industry leaders doing good work in targeted areas. A good example is Adam Matthews [Church of England Pensions Board] and his mining work. Railpen on dual-class shares is another pocketed area.
We need more of these focal points and more people leading them like they are. We will achieve much more of a maximum impact, as opposed to us all working in silos, spreading ourselves too thin.
What’s your focus going forward?
Building the team. I just hired a new stewardship manager, so we now have three. We’re looking to double that in the next few years.
Ultimately, that will allow me to focus more on industry and policy engagement, which is important for the head of responsible investment to do.
Then we are looking to integrate climate beyond developed equities into other markets and asset classes.
We are also looking to embed nature and human rights more formally into our stewardship processes.
When will your work at People’s Partnership be complete?
There’s tension there. Do I want to be out of a job? I suppose I do. Ultimately, the goal is to do such a good job that dedicated responsible investment teams are no longer required.
And we are so successful in industry and policy engagement, that we create a sustainable financial system, and then everything will work the way it should by making me redundant.
Will it happen before I retire? No. But there will be work to do over the next 10 to 15 years.
LEANNE CLEMENT’S CV
Sept 2022 – present
Head of responsible investment
People’s Partnership
Oct 2021 – Aug 2022
Head of stewardship UK/EU
Carbon Tracker
Mar 2017 – Aug 2021
Campaig n manager
Association of Member Nominated Trustees
Apr 2016 – Sep 2016
Responsible investment manager
Pension Protection Fund
Jun 2014 – Mar 2016
Responsible investment officer
West Midlands Pension Fund
Jun 2013 – Apr 2014
Responsible investment consultant
Nov 2011 – May 2013
Responsible investment officer
London Pensions Fund Authority
Mar 2009 – Jul 2011
Researcher – proxy voting and shareholder services
PIRC
Jun 2008 – Sept 2008
Sustainable supply chain internship – MBA dissertation
Arcelor Mittal
Apr 1999 – Aug 2007
Intermediate to senior project manager
Exp Global
Jul 1997 – Apr 1999
Environmental Consultant
AMEC Earth & Environmental
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