ASI Responsible Investing Podcast

Amanda Young: Welcome to the Aberdeen Standard Investments Responsible Investing podcast. I am Amanda Young, your host for today. Now, these podcasts are designed to hear from a range of different speakers and guests on responsible investment topics. Today I am delighted to be joined by Julia Dreblow, who is the director of SRI Services and founder of Fund EcoMarket. Julia, welcome to our podcast.

Julia Dreblow: Thank you very much, Amanda. Pleasure to be here.

Amanda: In a minute, I'm going to ask Julia to provide a little bit of colour around her day job, but before I do that, it is useful to know a little bit about our guest. So to introduce Julia, she is a stalwart of the sustainable investment market and a true retail SRI specialist. For over three decades, Julia has been driven by her incredible passion to advocate for financial services community to play its part in addressing climate change and other environmental and social challenges. In fact, she was a mover and shaker before responsible investment became fashionable.

Now, during her childhood, Julia spent a few years in America but largely grew up in North London. Although being in a city, she was fortunate to live next to her uncle's water garden and surrounded by fields, so had a natural interest in all things nature. In this instance, particularly fish, and this passion extends to marine conservation and a particular love of whales. While Julia has known her husband, John since school, it took her jumping off a harbor wall in Wales in order to rescue a dog to get him to notice it.

Now, while a good swimmer harbour wall climbing was not part of his skillset, so luckily, he was able to get people to come and rescue her. Prior to starting family, Julia had a passion for traveling, including whale spotting in various parts of the world, scuba diving, and seven months in Australia, volunteering for Greenpeace, so that's a personal passion, but what about her work?

Well, she started in finance in 1989 at NPI, it was here where the global care funds were launched in 1991 when the concept of ethical investment was introduced to her, and she realized she had found her passion. She has been actively involved in the UK Sustainable Investment of Finance Organization, commonly known as UKSIF since it was set up and she also helped establish the first national ethical investment week in 2008. Now, this since has evolved into Good Money Week, which is run in October every year. She worked for Friends Provident in ethical investment for many years.

Unfortunately, Julia was a victim of the 2008 financial crash and found herself without a job. With two young children, what did she do? Judy has set up on her own and founded SRI Services. Now, Julia is very much a woman who followed her heart and her passion and she's often ignored advice from financial services professionals, such as not telling anyone she was a member of Greenpeace all those years ago. Now she describes herself as a mother of teenagers and a proud dog owner. Julia, again, a warm welcome.

Julia: Thank you, Amanda.

Amanda: Now, to start off, perhaps you could tell our listeners a little bit about SRI Services and Fund EcoMarket, touching on how it got started and what you are trying to achieve.

Julia: Yes, sure, so Fund EcoMarket and SRI Services really came about from when I left Friends Provident. I was very aware there would be a hole in the market, no one bringing together information and pushing it out to financial advisors and others, so that they could be aware of the different options and strategies and the general importance of the area. As it happened, my husband had set a company for me 10 years earlier as a Christmas present. I had a company sat there on the shelf, and once I dusted myself off, decided to get on with it.

I wrote all the text for SRI Services just to explain what sustainable and responsible investment was about, breaking it down into its constituent parts. I couldn't work out quite what to do with the technology, so I had to create a separate database tool, which brought together all the fund information because my next job after explaining generically was, okay, so how do we go about addressing this?

So I've basically built a database, which is free for everybody to use. It's designed around financial advisors, advice processes, so they can fit it into their due diligence processes and compliance requirements. It's there for everybody to use because everyone's got to understand the variety of options and the different ways that they can reflect the way they think about things and the stuff they care about through investment strategies because generalising doesn't really work in this area.

Amanda: You've absolutely hit the nail there, Julia. I think transparency and information is so important. Now, as part of that, you've been in this industry pretty much longer than anyone I know, a stalwart of the sustainable investment industry, if you like. I'm really keen to hear your view of how the industry has changed over the past three decades, what the biggest drivers of these changes has been and what that means for what you are trying to deliver?

Julia: Sure, so when I started out, we were kind of-- well, people like me and there weren't very many of us, we were the strange person in the corner who seemed to think that the environment was somehow important when everybody knew it wasn't.

Amanda: I can relate to that if that helps.

Julia: That there was a little bit of sympathy. It was seen as slightly humorous, fortunately, when I was at Friends Provident, initially, when I first went there, I was on the floor with the salespeople, and there were lots of strong characters there. Having another strong character wasn't in any way a problem but it was just a bit weird. That's where things like UKSIF came into it. It was a real haven, being able to get together with people and talk about things you cared about. There were individuals scattered around the investment community, who really knew that things had to change and that investors can't keep making money out of trashing the planet forever, then that growing realisation increased and increased.

Of course, it took a massive step forward with the Paris Climate Talks when that agreement was reached. Blue Planet, of course, was hugely influential. People are gradually starting to realise that we're not living in a parallel universe, the investment universe is actually part of our planet, and we're totally reliant on it. That realisation has started to shift is nothing like where it needs to be. There's still way too much game playing in this area but the whole sentiment around it has shifted, regulation has helped to some extent, but people need to be well ahead of regulation if we're going to address issues like climate change. The penny hasn't dropped for a lot of people yet, but we are getting there. It's going the right way.

Amanda: I think that brings us on to the issue of greenwashing, for instance. You talk about the fact that there's a lot of interest in this industry that we're moving forward but one of the challenges are people just saying things because they want people to hear them, or are they actually doing what it says on the tin, so to speak. As a very principled person who's aiming to educate, inform, what is your view on the risk of greenwashing? How do investors really understand what their funds are doing?

Julia: Yes, so good question. This is a hot topic in our area at the moment. Let me first caveat this by saying I'm no angel, my life is far from perfect but I do really care about this stuff. I like to see the good in people, so I tend to split greenwash into two groups. I would say that, on the one hand, you've got people doing greenwash without knowing that's what they're doing. I speak to lots of people who are sales, marketing, even investment professionals, and they're talking about a fund that they think is amazing, really different from what everything else does. They don't realize how far off the market is from what actually other fund managers are doing. They just genuinely sometimes get it wrong.

Amanda: So is that more just lagging the industry as opposed to fundamental greenwashing?

Julia: That's a mistake. I don't think that's deliberate. I think there's a lot more of that around than people realize, where these guys have not spent their life reading up on stuff on climate change and system change and how things need to advance if we're going to really keep population levels and health and generally not trashed the climate so that future generations have an absolute horror. They just haven't grasped that. The side that really worries me though, is where you've got the inconsistencies between what a fund says their policies are and what they actually do.

You get this with a lot of funds that track indices so they might be linking to say the FTSE 100 or something. They're telling people they're doing amazing stuff, but I'm saying the FTSE 100 is the easy example but other indices where they give the impression they're going a lot further than they are and we know that in reality, they're only chopping out a tiny fraction of companies. So they're leaving in their portfolios, the big oil companies, major polluters, mining companies with horrifically low standards, poor supply chain management, treating their employees really shoddily.

A lot of that, I guess, also, you can forgive a lot that actually if you know that a company is doing what they can to use their power as a shareholder, to vote down senior executives who aren't moving forwards at the speed that they need to move forward. They're not addressing their human rights issues or whatever issues are pertinent to that business. Where you've got inconsistencies around voting, people talking about understanding sustainability and is fundamentally changing the way we invest and then not voting in line with climate resolutions.

Just saying one thing doing another, so that deliberate misrepresentation of funds strategies drives me insane and the reason is very simple. It risks the misallocation of capital. People are putting money into companies they don't realise they're putting money into and that will absolutely undermine our ability to address challenges like climate change.

Amanda: I think those points are really interesting because it really leads on to the issue of transparency, because without this information, obviously, investors don't know. Transparency playing a big role in helping investors to know what their funds are doing. I'm not sure everyone in the industry is as transparent as potentially they should be. Often these things are quite complex and not straightforward. Do you have a view on whether the industry is transparent enough? Then on the flip side, also, the companies we're investing in? How do they fare?

Julia: Okay, so starting with the investment institutions, no, they're not transparent enough. There's a long way to go for them to improve but by the same token, individual investors, so the people who ultimately own the assets and all these funds talking about, they don't tend to have much information on companies themselves beyond headlines. When a fund manager tries to be really open and transparent, firstly, you'll end up with intermediaries saying, "You've given me far too much detail here, can't you make it more simple," which is just really awkward.

Then you'll land up with individual investors who may know something because they've got their cousin's best friend works for a company, they will know particular bits about a company, but they won't understand overall, where the company is heading. If you've been involved in writing papers on companies, as I know, you've done a lot more of this than me, but I have done some of it. Companies are really complicated. You can't sum it up in two or three words. This is where ratings and things go wrong because people try and crunch it down. You can't, there's a lot needs to change in the world. Sustainable and responsible investment is about wrapping your head around that.

When I break it down to keep it really simple for people, I basically say there's three main issues or four main issues, people need to look at three approaches. Ethical, social, environmental, and then governance to some extent, but most retail investors don't understand that, how important the management of the company is. The three approaches are, you can avoid something, you can support good practices and give opposite flip side to that, or you can try and change it. You can't break it down to make it easier, but the real details on companies is quite messy.

Amanda: I think it really touches on an issue that I personally have found a real challenge over the past few years. That is trying to explain to those in the responsible investment industry, to investors, to customers to intermediaries, what all of the different terminology means. You've touched on it a little bit there but we've got terminology ESG, ethical, responsible, sustainable. I'm sure you will agree it is confusing. I love the simplicity you bring to that but being focused on helping people to invest in a responsible manner. Have you got any tips to others on how to make this clear for the end investor?

Julia: So I think I would generally start by saying to people, yes, this is complicated, because there's so much going on in the world, that if we can get companies to solve those issues, would make the world a better place. So don't be afraid of the fact it's detailed. Then do go and read up on the individual things that companies do or the fund managers look for and recognise that there are a number of fund managers out there who are really, really genuine. They're not always going to get everything, right. I mean, nobody does but they will be using their experience and integrity to make good decisions.

If you can understand and trust the process, then you're in a really good starting point but people have always got to remember though there's the two sides to it, there's both which investments do you select? Then once you own an investment, what do you do with it? Are you trying to encourage them to have higher standards or do you just buy it and that's it - game over? They've got to recognize those both sides. I don't know if that answers your question, enough, Amanda but I try and tell people not to be scared of the complexity because hiding from the fact that there's an awful lot of different issues that different people want to see addressed.

If you hide from that you're a little bit of a hiding to nothing, because you risk mis-selling something because you've not understood that there is a lot to deal with. I mean, just take the oil industry as an example, if you're worried about oil companies, are you looking at your supply chain as well? Are you looking at fracking? Are you looking at their supply chains? Are you looking at plastics? These things are all important now. It's completely changed the investment landscape voice. It's heading towards changing the whole investment landscape.

A lot of people just don't understand how big this is. We haven't made it complicated for fun. It doesn't entertain me, I'd much rather be able to do a three-step process that tells everyone everything. It's not like that.

Amanda: No, but I have to say just hearing you talk in a very simple manner about do you wish to avoid? Do you wish to support good practices or do you wish to do something positive is a a really nice simple articulation, but we will recognise that some products will be doing a combination of these three elements. That's really interesting. You just touch there on the oil industry. Now, one of the big scrutinies in the oil industry has been climate change and how the oil industry is contributing it. Obviously, it's a growing area interest across different sectors, across different funds. We're seeing regulation as well coming down the line for investors on climate factors. Are you seeing any other areas that investors are looking to put their money into or avoid altogether outside of the climate agenda?

Julia: Yes. Everything climate change and environmental has just always come top of the bowl. When I look at who clicks on what behind the scenes, on Fund EcoMarket. I put out lists of the top 50 things people search for regularly saying, "I'm as open and transparent as I can be on that." Oil and gas is always way up there. The things that I think coming down the track, we've talked over recent months about social issues so people issues.

COVID has definitely put the spotlight on that. More people are concerned about labor standards, human rights, how employees are treated. That's definitely been a shift recently, not actually coming through my stats on Fund EcoMarket yet, which is interesting, but the buzz around it has completely changed. The other big issue, then I would say is biodiversity.

Things like deforestation that always comes up fairly high in the clicks on my site, but people have got to understand that biodiversity loss is a major challenge and that feeds through the concerns about the food chain and our ability to feed people and the way we're messing with taking risks on food supply chains. Again, COVID has shone a spotlight on that kind of thing. Overall though, I would say there's a bigger emphasis towards people wanting to have positive impacts in whatever shape that takes. There are many different forms that can take, but that's definitely a shift. People are saying, "I want to do something better with my money."

Amanda: That's great to hear and a real positive. Now, regular listeners to these podcasts will know. I always ask my guests for an inspirational book, TV programme, or film that they would like to recommend. Now, I did mention this to Julia beforehand and I thought her recommendation was a really interesting one. Julia, do you want to tell us a little bit about the book that has inspired you in your life?

Julia: [laughs] As the big intellectual I am, my book, head and shoulders above anything else is a book I was brought up with which is The Lorax by Dr. Seuss because it's written for children. It's a kid's book. I remember being read it when I was a small child. My brothers and I used to make my father read it regularly because it made him cry. My father was-

Amanda: That was quite cruel.

Julia: My father was in banking – he was very pretty hard nosed about these things. 20, 30 years on my kids then did the same to me for years. The Lorax is all about the Once-ler family chopping down all the trees, glamping up the ponds with a humming fish hummed and on all these animals disappearing because their habitat has been destroyed and it ends on the note of the Once-ler asking a small boy to look after this last Truffula seed, to replant it in the hope that one day the Lorax and all his friends will come back.

Now, if you can get your head around that story, you can do anything in this area. You can completely get why people like myself and there's many of us who are so completely devoted to shifting investors to more sustainable investment strategies because there's no planet B, as they say. We've absolutely got to get on with it.

Amanda: When you mentioned that and I have actually seen the film with my son. It is one that we should all be looking at. Thank you for that lovely recommendation. This has been such a great discussion. Given your industry experience, what do you think the next five years holds out for us?

Julia: I think we will see massive changes over the next five years. We know there's more regulation likely to come down the track. We know that climate change has been taken a lot more seriously. We know also that the public really the new kids on the block in this area are actually starting to ask for this and approaching financial services community along to accelerate things.

I think a lot of the public if you like, are aligned with people like you and me, Amanda, who've been doing this for a long time and we've got to get that middle ground, everyone in between those two extremes, those people who are newer to the area recently launched funds, and just started to design their strategies. Also, those that still are disinterested or just waiting for regulations to come on. We've got to get those guys to come with us because we've all got to work together. I think we will see this continued mainstreaming of sustainable investment. That brings risks, of course, because businesses are competitive. Everyone's trying to beat their competitors, but I just really hope that the feeling we had all those decades ago, where we were all actually in it together, we were the guys who were trying to change things, didn't matter if we were in competing companies, we just knew it had to change. I think biggering bettering if you like to use a Lorax phrase. [laughs] That will happen.

I think there's going to be real challenges along the way and I think there's going to be some really horrible game playing. Particularly some of the really big asset managers who have got massive budgets, who just drown out people like myself, who just realized 30 years ago that this was absolutely the way we had to go that they are going to continue to prove challenging, but hopefully, they will up their game as they understand it better. I'm hopeful that they will improve what they do, but they need to be put under pressure as they have been recently.

Amanda: Fantastic and thank you so much, Julia. I think you've given us lots of inspiring insights, but also some hope for the future. Thank you very much for that and giving us your valuable time today to share your insights of a growing industry. From my perspective, who would have thought we would be where we are today when we started out all those years ago and you, in particular, being such a long-standing member of the sustainable investment community?

Julia: Makes me very old. [laughter]

Amanda: Thank you for your time today, Julia.

Julia: Absolute pleasure, Amanda. Thank you for asking me to do this.

Amanda: That ends our podcast for today. Now, to those who have taken time to tune in, many thanks for listening. Please, download our previous podcasts where you find them on our website or whatever mechanism you normally use to get your podcasts. Watch out for our next episode and tune in.