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PLSA attendees told to broaden ESG engagement beyond sin stocks

Investors should go beyond the traditional sin stocks and engage with companies such as food producers to help improve their practices, delegates heard Thursday at the Pensions and Lifetime Savings Association's investment conference in Edinburgh.

Panelists continued the discussion started on the first day of the conference, reiterating that expanding environmental, social and governance efforts to other asset classes — including loans, real estate debt and real assets — could enhance overall efforts to build a more sustainable financial system.

Helena Vines Fiestas, head of sustainability research at BNP Paribas Asset Management, said companies that produce cereal are among those that court risks if they target children. "Companies that use high levels or sugar and saturated fats in their recipes need to reformulate to innovate," she said.

However, Christopher Snowdon, head of lifestyle economics at the Institute of Economic Affairs, said divesting these stocks from a portfolio will not make much impact in terms of changing the behavior "A huge sell-off of assets wouldn't make a difference for the demand for the products (that these companies are selling) or to the company fundamentals."

Speakers agreed that this is a key challenge with the tobacco industry. "As a passive investor we can't divest, so we have to engage. Engagement does impact the behavior of companies," said Mark Fawcett, chief investment officer of the 2 billion ($2.8 billion) National Employment Savings Trust, London. However, Mr. Fawcett added: "Probably, engagement won't work with (the) tobacco (industry). But it is an investment risk we have to manage."