ESG initiatives: selective but effective collaborations

Please remember that the value of a stock market investment and any income from it can fall as well as rise and investors may not get back the amount invested.

Environmental, social and governance issues have never been more important. Baillie Gifford recognises the benefits of working with others to address them. We want to be ambitious, but we also need to proceed with care. There’s a burgeoning number of ESG initiatives within the asset management industry, and we must consider the long-term impacts they could have on our clients. Simply scrambling to collect lots of badges or stamps of approval would do those clients a disservice. 

Building productive relationships takes time. For instance, Baillie Gifford has been a member of the Carbon Disclosure Project (CDP) since 2002 and we continue to be an investor signatory. This provides us access to the data it gathers on companies’ environmental behaviours as well as regional insights. In late 2020, we became one of the first to subscribe to the CDP’s new temperature ratings methodology, which it developed in conjunction with the World Wide Fund for Nature (WWF). This will help us research the quality and consistency of company efforts to cut emissions in line with the Paris Agreement on climate change. 

We also became an official supporter of the Task Force for Climate-Related Financial Disclosures (TCFD) in 2020, and we encourage our holdings to follow its guidelines when drawing up their own environmental reports. Baillie Gifford holds itself accountable to the same standards, and published its first firm-wide TCFD report in March 2021. LTGG is now in the process of producing its own TCFD report, specific to our clients’ portfolio. 

The attention our industry is now giving to climate change is a welcome, albeit belated, development. But climate responsibility is only one aspect of ESG. And we are engaging in other elements to benefit our clients. 

One example includes joining a global reporting initiative roundtable hosted by the Investment Association. Discussions have covered tax reporting standards and working with the Sustainability Accounting Standards Board to settle on universal reporting requirements. These aim to make it easier for companies to report their sustainability metrics while avoiding different regional initiatives that add complexity. 

We also joined a roundtable on pay ratio disclosures by UK companies, led by Pensions & Investment Research Consultants, ShareAction and the High Pay Centre. In addition to examining available data, it will explore the ways pay distribution is relevant to investors.  

Less formally, we often meet and network with ESG peers and, when appropriate, arrange joint meetings with company representatives. This timeline displays our formal initiatives to date. If you would like more information on any of them or on what’s next, please ask your Baillie Gifford representative. 

These engagements and collaborations allow us to contribute to the development of industry best practice and, where appropriate, bring more pressure to bear on companies. This can help to enhance our clients’ long-term investment returns.

Important information

The value of an investment, and any income from it, can fall as well as rise and investors may not get back the amount invested. Past performance is not a guide to future returns.

This article was produced and approved in January 2022 and has not been updated subsequently. It represents views held at the time of recording and may not reflect current thinking.

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