Biggest challenge for active ESG investors

What is the biggest challenge you face, in organising a team that has responsibility at its heart?

I think one of the big challenges that you have, when you’re building a truly responsible investment firm, is to get the culture correct and to make sure that you have an appropriate alignment with incentives. We spend a lot of time on a couple of areas.

One, in terms of putting in place a really powerful support network for portfolio managers. I introduced a behavioural psychologist to work with them, a couple of years ago, who focuses with them, on their investment decision making, on their behavioural biases and their resilience, because things don’t always go according to plan.

The second part is to make sure that you have aligned your incentive structures appropriately. When it comes to compensation at year end, 50% of what I will look at is technical and there, I’m typically looking at three to five-year returns. The other 50% is entirely down to behaviour. How have you been as a colleague, as an ambassador for the company with our clients? That huge component devoted to behavioural issues, is a significant determinant in defining what kind of culture we have at the firm.