ESG Viewpoint: PineBridge Investments

# RepRisk interviews Alessia Falsarone, Head of Sustainable
Investing DMFI, Chair, Corporate Responsibility Steering Committee at PineBridge Investments

Alessia Falsarone: I am responsible for designing and driving the developed markets fixed income team’s sustainability agenda by providing subject matter expertise, guiding the day-to-day portfolio-level investment decisions involving ESG dimensions, and aligning the team’s traditional portfolio strategy and investment risk processes. I have also strengthened our coverage of global green, social and sustainability bond markets, including the development of the proprietary ESG evaluation framework we rely upon in bond selection. Our approach involves the outright integration of ESG considerations into our traditional portfolio allocation decisions – from in pre-investment due diligence to post investment evaluation analyses. I also serve as Chair of the firm’s Corporate Responsibility Steering Committee. While promoting the sharing of best practices, we aim at ensuring that our corporate responsibility activities follow a cohesive strategy – the same way investors expect from investee companies.

AF: Internally, I have seen renewed efforts at strengthening our own education surrounding emerging themes in the ESG investing landscape while also focusing on the changing regulatory environment we face as a global investment manager. Not surprisingly, the industry continues to transition from pure avoidance of select assets driven primarily by ethical considerations and values-based screening (think for example of the so-called “sin sectors” such as Tobacco, Alcohol, and Gambling), and all the reputational risks associated with financing such activities, to the recognition nowadays that there is a wider set of financially material ESG dimensions beyond traditional exclusions. That wider set is most likely to play a role in proactively evaluating the financial stability or operational strength of a company and its positioning in the marketplace.

Externally, I have seen the dialogue with asset owners – from early adopters of sustainable investing policies to late comers – continuing to move in the direction of partnership with the investment management community in terms of supporting initiatives that promote transparency and disclosure of ESG risks.

AF: The RepRisk ESG Risk Platform is a key enhancer to the evaluation of financially material trends in our active ESG risk exposures – both at the aggregate portfolio level as well as at the individual company level, and through the risk management lens. It enables us to drill down on individual risks by pillar and single out bond-specific sources of near-term event risk. We are able to identify issuers “at risk” at the pillar level (E, S, or G) and to review the history of an incident. The validation of the information feeds is particularly helpful as it is available by “influence” of information source (country and corporate level).

It also continues to play a key role in our ability to translate more sophisticated client-specific investment policy guidelines and compliance requirements into actionable flags. For example, the adaptability of the RepRisk Platform has enabled us to map international agreements such as CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora) with country-level exposures to illegal trade activities, and address potential regions at risk.

AF: Year after year, the Sustainability Accounting Standards Board (SASB) continues to establish a vision for transparency and comparability of financially material information that bridges the information gap between investors and investee companies. We are now in the adoption phase of the standards. The launch of Standard Advisory Groups is instrumental in bringing to life an investorcorporate reporting dialogue. Using SASB’s work, I have been able to foster deeper dialogue with internal and external stakeholders and strengthen our conviction calls as traditionally labeled nonfinancial risk exposures are now fully part of pre- and post-investment analyses. It is exciting to see RepRisk integrating the SASB materiality framework into its ESG Risk Platform. I am thrilled to see that part of the process being automated!

AF: We are finally seeing consensus on the fact that building climate-resilient investment portfolios will be a key driver of investment flows over the next decade and beyond. While we are not asked to be climate scientists, the asset management industry needs to be able to discuss and compare which environmental risks are being recognized and priced in the marketplace. We also need to leverage a common toolkit to quantify the negative externalities associated with climate. While the industry is rushing to report toward measurable goals, we have yet to define what progress looks like according to what measures. The role of regulatory bodies and the industry dialogue with public-policy makers on this topic will be a key enabler of the industry delivering upon those premises.