How AIMCo Investment Partners Manage ESG Issues
It used to be that managing environmental, social and governance (ESG) issues was something businesses saw as an ethical choice. That’s no longer the case, according to the panelists who participated in a lively session at AIMCo’s Spring Investment Symposium. The three senior executives from AIMCo’s investment partner firms joined moderator Alison Schneider to discuss their experiences in the transportation, oil and gas and real estate sectors.
Schneider, AIMCo’s Vice President of Responsible Investment, keyed in on how ESG factors drive value in their businesses.
E and S and G
Some businesses may be tempted to focus on one or two aspects of the ESG conversation. Mary Grant, CEO of U.K. rail company Porterbrook thinks that would be a mistake, potentially inhibiting revenues.
From an environmental perspective, Porterbrook, an asset in AIMCo’s clients’ Infrastructure portfolios, is taking a serious approach to decarbonizing its fleets. On the social front, the company puts a lot of effort into being a good employer. Good governance is critical to maintaining its credit rating, coupon rates and financing structures.
“I never put the financial objectives at the top of any set of values and vision,” she said.
“All the other elements — your building blocks of doing the right things, of driving your business performance in these three areas — will give the right levels of returns and revenues back to the business, back to shareholders.”
The Price is Right
Climate change is on Brian Newmarch’s mind, every day. He’s Vice President of Sustainability at ARC Resources Limited, a company AIMCo clients hold in their Private Equity portfolios. It’s not hard to make a business case to lower emissions, when prices, and the potential for profit are being driven by the market.
“Consumers are actually paying more for a molecule of hydrocarbon, that has a lower carbon footprint associated with it. So, you’re seeing a commodity that should be a totally fungible product, getting different pricing depending on how you’re developing your resource,” said Newmarch.
As a result, quantifying, disclosing and making capital investments to lower carbon emissions have become priorities.
“If we want to access these markets and differentiate, progress, and play a key role in the evolving economy here, climate change and emissions has to be part of our strategy,” he added.
Real Estate Reality
In the real estate space, the pandemic highlighted issues that have always been important, from a sustainability perspective.
“We spend almost 80% of our time in buildings and these buildings need to be places of health and high productivity, not places where there’s chronic bad air quality," said Steven Pacifico, VP, Sustainability, Innovation and National Programs at Epic Investment Services.
Asset owners who were already prioritizing sustainability had an advantage.
“We’ve been doing a significant amount of green certifications and AIMCo has a very well-certified portfolio and those certifications helped us to meet the pandemic protocols in a way that the uncertified buildings couldn’t. Because we already had enhanced filtration, we were already testing for air quality, we were already increasing our air exchange rates,” said Pacifico
He hopes that this increased focus on health and wellbeing will help us tackle a far bigger challenge — climate change.
Watch the full Investment Symposium session here: