At work. At play.

In this behind-the-scenes interview, we talk to investment analyst Leah Keys about responsible investing and what she’s doing to make a difference – both at work and at play.

At work, Leah is an Investment Analyst for Mercer New Zealand.

At play, Leah is a keen gardener.

What do you do at Mercer?

As an Investment Analyst, I’m part of a team that analyses the performance of Investment Fund Managers, researches financial markets and makes recommendations on different investment strategies.

Something I really enjoy about my role is assisting with the evolution of responsible investing within the Mercer New Zealand funds.

Why the interest in responsible investing?

Responsible investing, is an important and emerging area within finance and has presented me with an opportunity to work with and learn from Mercer’s global Responsible Investment (RI) team which has been advising clients on all aspects of RI since 2004 which was really appealing.

So what exactly is responsible investing?

That’s the other thing I find interesting. On a personal level, everyone has different views around what’s sustainable or ethical. For some people it’s about the environment, like not investing in companies associated with high carbon emissions, while for others the focus is on avoiding companies which do harm such as manufacturers of tobacco or controversial weapons. In contrast, rather than screening out companies, other investors might prioritise investing in companies which achieve a positive impact

Given the myriad of ways to define it then, who decides what responsible investing is?

The United Nations Principles for Responsible Investing is a good place to start. It has six principles that provide a global standard for responsible investing covering environmental and social criteria and factors relating to the governance of individual companies; Mercer was actually one of the founding signatories as a consultant in 2006.

Environmental, social and governance? Can you unpack that please?

Sure. Environmental refers to the types of products and services a company produces (does it produce fossil fuels or sustainable energy?), as well as its own use energy usage and efficiency.

Social criteria is about a company’s wider responsibilities and behaviours. Does it have a “Social licence to operate? Does it contribute to the broader community? What are working conditions like? Is it an equal opportunity employer?

Governance is all about how a company conducts itself, including giving shareholders an opportunity to vote on important issues - like the appointment of new board members and increases in their remuneration.  Is its Board of Directors diverse as well as experienced?

How does that fit with what Mercer is doing?

Along with other investment companies, Mercer helped the UN develop the six principles of responsible investing. Following on from that, we’ve developed our own ESG framework, the four pillars, which are

  1.   Integration: Include ESG factors in investment decisions, with an explicit approach to climate change transition and physical risks, which are portfolio wide.

  2.   Stewardship: Exercise active ownership/stewardship through voting and engagement with underlying companies and by engaging with policymakers

  3.   Investment: Allocate the sustainability themes or impact investments for new opportunities – for example, renewable energy, water and social housing

  4.   Screening: Screen out sectors or companies deemed to be irresponsible or not acceptable to profit from

As part of this, we have developed a tool which we use to evaluate the ESG credentials of the Investment Managers we delegate to. Every Fund Manager is rated and our aim is to improve the average ESG rating of our managers over time.

Is that making a difference?

I believe we are.  For example, we’re seeing investment managers progressively pay more attention to ESG matters in their investment process. In addition to the existing exclusions in our funds we are progressively adding investments with sustainable themes such as a wind farm in Portugal and an industrial and commercial buildings which are water and energy efficient.

There's so much to do in so many different areas, but we’re making progress.

And how about outside of work, what are you into?

Responsible investing has definitely sparked a passion in me I didn’t know I had previously.  The reality of climate change has always been a cause of concern to me, but being a part of an industry where we’ve started asking ourselves ‘how can we as investors make a difference?’ resulting in discussions with managers around what companies are doing about it - and what companies need to be doing about it - has definitely impacted the way that I behave in my home. I’ve started to stretch my thinking to ‘how can I as a consumer make a difference?’. I started gardening prior to working at Mercer and developed quite a green thumb; however not long after starting at Mercer I was inspired to learn more about home waste management like composting and worm farming, something I’ll admit I’m still trying to get the hang of. My hobby is making a difference on a small scale - but I’m glad it’s a start.