P&I: How important is being able to provide executable advice?
Kendall: The marketplace has become saturated. In many cases you have specialists that are either working in one or two asset classes. In contrast, DWS is prepared to provide nonbiased fiduciary advice to clients across every asset class. We’re able to provide a view across geographic regions, then partner with those clients to execute those views and opinions in whatever product structure they prefer. I think that is a huge, huge differentiator.
P&I: How do you make sure that your firm’s ESG DNA flows throughout the organization?
Kendall: Ensuring that ESG is top of mind throughout our organization has become part of everything that we do. In 2014 we launched our DWS ESG Engine as a way to grow and analyze expertise across the full spectrum of responsible investing. Since then, this tool has become the centerpiece of our commitment to integrating ESG considerations into our investment process. Every DWS investment team uses it to make investment decisions for their portfolio.
Our People Leadership Forum and our People Engagement Group spend a lot of time integrating sustainable practices in our workspace, making sure that we are incorporating sustainable standards in our day-to-day operations.
P&I: How important is it that DWS is aligned with the companies that you own and your clients?
Kendall: It’s absolutely critical. I don’t think you can say “This is the way that we invest on behalf of clients” and then act differently as a company. We’re proud to be able to say, “Here is how we believe ESG standards should be set in client portfolios and, by the way, it’s also how we strive to act both inside and outside the office.”
P&I: Is that a ripple effect of DWS’ focus on ESG?
Kendall: Yes, in some respects. For example, we launched the first [exchange-traded fund] to provide exposure to an ESG-adjusted S&P 500 index in the U.S. market. Another example: Last year we worked with a very large West Coast technology firm to create an investment fund in China, connecting suppliers with renewable energy sources. This firm was deeply committed to addressing climate change and [increasing] the use of renewable energy within its supply chain. Initially, 10 suppliers agreed to jointly invest in one of our bespoke solutions, which will in turn invest in and develop clean energy projects totaling more than [a] gigawatt of renewable energy. That’s the equivalent of powering nearly a million homes. Examples like that — where you see the work we’ve been doing for a very long time, serving and shaping the way one of the world’s largest corporations operates — is both gratifying and energizing. What’s been important to us for decades has become important to more and more clients as well.
I’ve been pleasantly surprised by the conversations clients want to have. And I’m happy that we can provide solutions that may be more complex, as in a bespoke fund or an efficient, cost-effective ETF for institutions as well as individuals.
P&I: Do you focus on any particular ESG issues outside of the investment process?
Kendall: While we believe in the importance of all ESG issues and initiatives, the impact of physical climate risk on portfolios has been a particular area of focus at DWS. A study by our sustainable research team found that investors tend to approach climate resilience by measuring the carbon emissions of issuers. This helps assess transition risk in a portfolio, but it fails to consider physical risks like sea-level rise, droughts, flooding and cyclones. To us, these pose a more immediate threat to a portfolio. So we’ve spent a lot of time assessing the impact of these physical risks and how investors should be thinking about them.
P&I: What’s your personal view of the world from an ESG point of view?
Kendall: That’s a good question. I can tell you that becoming more informed has developed my personal views. Our thought leadership clarifies the importance of these issues and lays a framework for ways in which we can all invest more responsibly. As we like to say: It’s possible to do well and do good. •