Brunno Maradei

Changing our way of thinking about wealth: the ultimate solution to a changing climate.

How will society face up to climate change? Brunno says it’s up to all of us. “I think the incentives are skewed the wrong way. I think the messages that we have to deploy are not that popular. And I think education is fundamental. What we need is actually to take a step back for a minute and think about what we want to achieve as a global society, what do we want for ourselves in the future. Do we really need to fly as much? Will it make us happy to have that third car in our garage? How much is too much? We need to think about happiness in a different way, because it's been taught so pervasively for the last 50 years, that happiness comes from accumulating wealth and having more and it's just not sustainable overall as a philosophy for our civilization.”

Engagement is critical but it’s not the industry’s magic bullet.

Brunno stresses: “The main power of investors is engagement. We live in a polarised simplistic world where people want everything in a five minute Tik Tok video, but the issues we're dealing with are complex. You can't expect engagement to work within a year, and then you're done. We find it takes on average three years for a company to try to action something we want them to do, because they need to get the buy-in at every level of the institution to actually make it happen.”

And even at $460bn, Aegon has a small voice, Brunno says. “Often, we are way smaller than the companies we're talking to. In global capital markets, if you go to a company with a combative attitude they’ll just chase the next investor – one that doesn’t care about cobalt mining or human rights in Congo.” “It’s also important to recognise that most investors only have access to public capital markets, which are about 30% of all economic activity. Nobody's addressing the private companies held by rich families or state-owned enterprises.

“Finally I have a fiduciary responsibility towards my clients. The majority, if you told them there was a trade-off would say, forget the sustainability, I just want to make sure I have my money when I retire. People really need to be bought into the fact that there are risk-return restrictions potentially if you go too far, though personally, I think there's enormous financial opportunity attached to sustainability as well.”

Seeing beyond stranded assets. Divestment as an agent of change.

Engagement on its own will never be enough. “What bothers me slightly about this actively responsible investment world that we live in, is that sometimes it's taken to be a good substitute for just good political dialogue.” That certainly trumps divestment.

“In tobacco, what has worked wasn't divesting from tobacco companies, or even engaging with them, tobacco companies are still doing what they've always done. What has worked is advertising regulations, price increases - limitations on how companies can market their products to society. And that has come from regulations.”

According to Brunno, it’s all a question of how you manage your intervention. “We believe every company, small, large, nano or private should be encouraged to take steps towards sustainability practices. And if we are going to ring-fence all the stranded assets, who is going to manage them? The carbon approach that everyone takes is limited linear thinking for such a complex problem.”

Brunno says being a shareholder or bondholder is a “tough road”, mounting a credible effort to engage, make your voice heard, track that over time, join the initiatives, and collaborate with other investors. “Believe me, that's not easy.”

Sustainable investment: there is no substitute for human capital

Of course everybody has a different view of what is important and what isn't, and that problem won’t go away. “The SDGs have a useful reference framework, but there is no real consensus around even that apart from at government level.” Brunno admits environmental accounting has made progress but says social accounting is tricker. “For instance, in certain jurisdictions in Europe, you just can't collect racial diversity or ethnic diversity data physically, it's prohibited to even ask the question. In America, they're a bit better because they have this Equal Employment Opportunity Commission and people do make disclosures towards that. So on diversity you couldn't even have an index, unless you're looking at a very simplistic indicator, like board diversity. “That means you will always need a human element and a human judgement attached to it - and that’s where you're talking about costs.”

Corporates can lead the way but not all investors can wait

Companies are generally bedding this agenda down a lot more into their business strategy and into the way they operate, Brunno says. “I particularly like seeing disruptors that are making that really core to what they do. Our sustainable equity strategy looks for this kind of company that is doing something really different.”

Bigger companies still face incentive barriers to picking longer-term winners. “Not long ago, everybody was incentivized with quarterly or annual results. Now, everybody tends to have a portion of their incentives attached to three or five year results as well but the system is just not built for that kind of long term thinking, and this is where you reach the limitations of what the financial industry can do.”

We have to encourage companies to adapt

Adapting is right up on there on the engagement agenda. “It’s something that we actively talk to companies about all the time, some more than others of course, but most companies will have to think about the physical impacts of climate change, probably sooner than they thought.” More frequent extreme weather events, flooding, and higher temperatures, will affect even tech companies who need to keep data centres cool.

“Physical risk is definitely here. Already we need to start getting a lot better. It’s quite shocking to me how poorly we've mapped it out so far, but I think there are companies starting to do that work, and it's encouraging to see that happen.”

The emerging markets puzzle

Decarbonising in Europe is to be applauded, Brunno says. “But frankly, it counts for absolutely nothing if we don't help emerging markets get to where they need to be in terms of carbon efficiency, and net zero, effectively. And you just can't talk to somebody in Africa who has no access to power, about the need to not build a fantastic coal power plant that will provide their village with around the clock power for their children to read and go to school, and for them to put food on the table. I worry that we get stuck in our developed market bubble of buying net zero products and an electric car and thinking we’re doing enough. I'm working towards it. But the scale of the challenge in emerging markets is very difficult to get your head around.”

Human ingenuity may just get us safely to 2050

“There are days when I’m glass half empty because I’m totally overwhelmed by the problems. And there are days when I'm glass half full because I'm always encouraged by human ingenuity and our ability to think our way out of big problems. I do believe technology will have some role to play in being our saviour - for instance, if tomorrow we managed to make nuclear fusion work. But then you still need to address other things such as our use of rare earths in mobile telephones - are we going to find other elements? Can you imagine everybody eating meat to the extent that we do today? But maybe we'll have lab-grown meat, beyond burgers will be the new thing, and everybody will be fine with it.”