“Any big plans for the coming year?” I asked the chairman of the insignificantly-sized investment company Kermitted Asset Management when we reinitiated our on-screen conversations after the Christmas break. “Absolutely,” the chairman replied with a brightness that felt odd for early January. “I have high hopes 2021 will be the year I introduce more tequila into my repertoire of lockdown cocktails.”
“A noble ambition,” I nodded. “But I was thinking more about plans for the business.” “To be fair, the business is pretty much the reason I think so much about lockdown cocktails,” sighed the chairman. “Still, if we must talk about work, you may be interested to learn the Christmas period set me thinking seriously about the passive side of responsible investing.”
“Inspired by the season of goodwill to all?” I asked. “Inspired by sitting around doing not very much while still getting paid,” he replied. “As you know, I’ve never had much truck with the index part of the game – somehow it’s always felt against the spirit of investing – and yet, the more I think about it, the harder I find it to argue against the maths.”
“And just to confirm your definition of ‘the maths’?” I prompted. “I should have thought that was obvious,” sniffed the chairman. “If one of the principal catalysts for launching Kermitted Asset Management was the indiscriminate flow of money into ESG-oriented investments, it would be silly to ignore passives – especially when a tiny percentage of a lot can now far outweigh a more, um, traditional cut of not so much.”
“You know, philosophically I still struggle a little with the idea of a passive approach to responsible investing,” I admitted. “And what bearing does that have on this conversation?” asked the chairman. “None, I suppose,” I shrugged. “Still, given billions and billions is now heading towards ESG-oriented index funds, it would be nice to think it is having the sort of positive effect at least some of its investors presumably hope for.
“I know there’s the argument the inability to stell a stock and walk away is precisely what makes a passive approach to responsible investing work – the idea being it’s more continuous, consistent and influential. Even so, for investors, that seems a take on ESG that’s so laidback as to be almost in bed. I mean, if you can’t be active about engagement, when are you ever going to be?”
“Continuous, consistent and influential,” muttered the chairman, scribbling in a notebook. “Ingenious. Got anything else … just in case our marketeers find themselves short of inspiration?” “I believe the bigger players have been known to argue they have the metaphorical muscle to beat up companies till they see the green light,” I replied. “But I’m not sure Kermitted is there just yet.”
“I suppose I could always send Adair round,” mused the chairman. “He’s been known to change a few points of view in his time.” “A hamster with the bite radius of a small shark can have that effect,” I nodded. “What’s more, it would come a whole lot closer to my idea of a properly ‘active’ approach to passive – and yet, regardless of his many qualities, Adair is but a single rodent.”
“For now,” said the chairman cryptically. “Anyway, philosophy and intimidation aside, I fear Kermitted faces another hurdle on the passive front and that’s my preference, wherever possible, to ‘back Britain’.” “I’m not sure I follow you,” I said. “Surely you’ve noticed how the Footsie these days is sooo early-2000s?” the chairman asked.
“Lots of oil, miners, tobacco, banks – none of which massively screams ESG. I mean, even the dear old pharmaceuticals, who to be fair are doing sterling work on the whole saving-humanity front, don’t have a spotless track record here. Sure, there are loads of splendid British companies doing exciting, eye-catching and ESG-friendly things. Trouble is, they all seem to want to list with mobs like the Nasdaq.
“So, unless the government moves fast to re-enhance London’s appeal as a place to raise capital, my most realistic hope for a UK launch to spearhead Kermitted’s passive stable would be something like a FTSE47.5 tracker.” “Have you thought about sending Adair round to the Treasury?” I wondered.
