1. Reflections from within the ESG community on “Talking Long, Walking Short?” & Forceful Stewardship April 2015

2. Person #1 “(In confidence), could not agree more with this one (and it has wider resonance beyond climate change engagement): If investor activities have the effect of protecting investors from either having to divest or being forceful stewards, these activities become part of the problem. One of our major clients is struggling to understand the need to stop what you call ‘tummy tickling’ engagement.”

3. Person #1 (contd) “The problem is actually ‘using engagement as an excuse to hold’ and plays entirely to your forceful stewardship approach. If a risk is considered important enough to manage by dedicating engagement resource to it you should be able to provide evidence of what that engagement is achieving. If you cannot prove that engagement is altering behaviour it is not effectively managing the risk, it is masking it whilst telling others ‘not to worry we are in control’ (and thus entirely counter-productive and dangerous). So my argument is the wider mindset behind adopting ESG ‘professionals’ – are they there as an excuse or are they a properly integrated part of managing a risk?”

4. Person #2 “The underlying question here - as so often - is about objectives. What was/is the objective of ESG - explicit or implicit? The problem is that right at its heart lies a conscious fudging of objectives. No-one could have signed up if it was framed as changing business models for environmental and social purposes, or reforming the whole of the financial system. So it was fiduciary duty and the business case. Now we have an industry, jobs, people with territory to protect and a sense of identity and self-worth to preserve, built up on the fudge (as it were!). My own included, of course. Hence my instinct just to go over the heads of 'ESG' and present the 'new' (or maybe original) objectives in their pure form. But I take your point about needing to overcome practical objections that are thrown at you and framed in terms of ESG.”

5. Person #3 “Why is forceful stewardship important? The objective is objective! It is not about setting interim targets with no scientific basis, it is about constructively shifting the economy to low carbon in a way that should be sustainable. Incremental change is not going to get us the 2° result we seem to need. It is accessible to the mainstream. Not every investor that supports the intention has to be out there pounding the pavement and pushing for change. Investors can get engaged in varying degrees depending on the needs of their stakeholders. It starts now but does not let up. This needs to be followed through to completion. It is action oriented and results will be easily transparent. It may be the only real alternative to divestment. Alignment with a 2° scenario is the only objective that matters for those that are not going to divest because they want to ‘keep a seat at the table’. Anything less than alignment with a 2° scenario across economies is not going to work.”