Rachel Halpern is the newly installed head of sustainability at asset consulting firm Jana.
Asset consultants like Jana have an important role for big investors like super funds and insurance companies. They analyse and recommend which investment managers would be a good fit for their portfolios.
And now, with the addition of a head of sustainability, it becomes very clear that ESG and Impact are essential considerations for institutional investors.
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On this episode…
We explored the key factors that an analyst like Jana looks for when they’re assessing an investment manager in terms of their sustainability credentials.
It’s an assessment of ESG factors, and whether they measure impact. It’s about governance and organisational behaviour. And more than ever, there’s a focus on climate targets and whether the firm is progressing towards net zero by 2050.
While ESG integration has gone mainstream, there’s a growing emphasis on the real impact an investment is having on the world, and we discussed the way investment managers can measure and report their real world outcomes.
My key takeaway this week…
Finance is about more than just the numbers.
As Rachel explains, “Jana’s business is built on strong relationships. And fundamental to that are face to face meetings”.
The firm does far more than analysis financial statements, they aim to travel to an investor’s offices to speak face-to-face. To ‘feel’ the reaction they receive to questions, as much as hear it.
And they want to see how the rest of the team works, moves and reacts. They’re all data points that combine to help their assessment of the investor.
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By Holly Ransom
Dream big spark change and become the leader of the world needs you to be by Holy ransom. I confess I’m not sure if I can make a proper recommendation because I’m only about a fifth of the way through it.
It helps with practical ways to lead change in an organisation.
Please note, all book recommendations are directed to Booktopia, an Australian online bookseller. If you buy through that link, you also support the podcast, as we may receive an affiliate reward! Thanks in advance.
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Full Transcript
Note: this was an automated production by Otter.ai, so some errors may remain
John Treadgold
Rachel, thanks for coming on the show today. Great to have you.
Rachel Halpern
Thanks, John, it’s really nice to be here.
John Treadgold
Now, there’s something very interesting about the asset consulting business. And I think it goes back to the basics of human connection, and communication and body language. And you’ll explain it better than me. But why are face to face meetings so important in your line of work?
Rachel Halpern
Oh, you’re absolutely right. I mean, Jana’s business is built on strong relationships. And fundamental to that are face to face meetings. So I joined during a time the time of COVID. So it’s fair to say that face to face meetings, they’ve been pretty limited recently. But I can take you through the advantages of face to face meetings from Jana’s perspective
It’s not just about the meeting itself, it’s about going in getting to chat informally with certain staff, either before or after the meeting, you know that that gives you the chance to pick up little details about their culture, about the people themselves or things that they might be considering. So you know, because often in a formal meeting managers do tend to stick to the script. And then you know, body language is important to when a tough question is asked, or actually even looking at the body language of the others in the room, and seeing if they react differently, that can be a telling sign.
And going to a manager’s premises, it allows you to see their working environment and their culture. So is everyone rushing around and not talking to each other in a friendly way, they can also be telling. That’s why we try and do as many face to face meetings as possible. But we’ve kind of had to reassess that during COVID. And in a post COVID world, we’re looking to reach a new normal. So I would say that video conferencing has become much more widely accepted. Even parliamentary meetings and board manager meetings are happening via video now. So it’s possible to do shorter and you know, maybe perhaps more intimate and purposeful meetings, face to face to augment more regular catch ups that are now happening over the VC.
But finally, I would say obviously, we’ll put this into a sustainability context. Corporate travel is the largest source of emissions from Jana’s operations. And certainly, I would say probably all consultancies, but we need to put this into the context of our business being built on strong relationships. So we’re looking to figure out how we can do this going forward. And we’ve landed on an approach where when we travel, we need to hit more than several birds with one stone. I’m currently doing this and tossing up whether or not to go to Europe. Yeah, it’s a lot of air travel. That’s a lot of carbon.
John Treadgold
That’s it. Now look, this is so interesting, I think this idea of financial services, being very pragmatic, very focused on the dollars and cents, and that your role as an asset consultant, assessing an investment manager that it would just come down to spreadsheets and data and performance. But in fact, it’s so important to sit opposite table, look them in the eye and really try to get a feel for the culture, and factor all of those things in to then be able to report back to your clients who are the asset owners like the super funds and the insurance company. So I think that’s very interesting. You did mention the sustainability issues from an organisational perspective, reducing the hours in the air. But coming back to the sustainability issues in the meeting room. Your role is a new one at John and newly created, how have those conversations changed now that these sustainability issues and questions about ESG and impact are so much more at the fore?
Rachel Halpern
Well, I think to say what’s changed, I’ll say what was. So originally for a number of years, I think it’s pretty well ingrained. Jana has been rating managers by ESG integration. And doing this, whether or not they were labelled as sustainability strategy or sustainability or ESG labelled manager or not. And by ESG, integration, I mean, environmental, social, and governance risk factors taken into investment decision making.
And all of our research staff have been trained to do this. And so we would expect that at all manager meetings, that would be a consideration. But now we’re building out our focus to be more on how the investment manager strategy has an impact on real world outcomes for the Environment and Society. Like one of the first ways that we’re doing that is looking at net zero, because Net Zero is an impact lens, as opposed to a risk lens,
John Treadgold
Touching there on a few of the key points you guys are focusing on. And I think I have jumped straight into into asking you some stories and some details. So I should probably wind back and introduce you a little bit more. And the fact that this is a newly created role at Jana, you left State Street to take it on. What does that mean for Jana to create a head of sustainability,
Rachel Halpern
My role was created so that Jana could be more strategic about the increasing amount of sustainability work that it was already doing. So there were lots of really good pockets of work by seeing that in tandem with the increasing activity in the market meant that a head of sustainability was definitely called for, you know, we had increasing numbers of sustainable asset managers and strategies to review increasing expectations from clients that sustainability be built into their portfolios, specific net zero commitments, particularly in the Superfund sector.
And more on the charities and university side, I guess, an expectation that they look to live their brand through their investments. And so to deliver on all of that, we need a you know, a Jana sustainability strategy, which is a key part of my role.
John Treadgold
Talking about this increasing activity in the market, does that represent a broader mainstreaming of ESG? And sustainability issues? Across finance? I mean, I wonder, have we got to a point yet, where ESG is a baseline?
Rachel Halpern
Oh, yeah. ESG integration, I think is mainstream. Now. It’s a question of, is that doing any good? How can we transition that risk lens through to a real world outcomes lens?
John Treadgold
And then is it like a credit rating for a company? Does every manager really need to have some sort of oversight of these factors to be taken seriously, are there still some laggards that soldiering on and fighting against it?
Rachel Halpern
Consultancies like Jana will always rate managers according to ESG capabilities. And they might have an investment strategy or be a value manager that is not traditionally thought of as a leader in ESG. But there could still be a really useful ESG lens, or even a net zero lens to apply.
I’ll give you an example. So you can have an Australian value manager who invests heavily in hard to abate sectors and the ESG lens there is, what is that manager doing to have an impact or to engage with those companies in those hard to abate sectors on their transition plans to net zero?
So that portfolio would score poorly on a carbon emission scoring, however, they can still have a really important and I think, actually fundamental role to play in reducing real world emissions in those hard to abate sectors by engaging with those companies.
John Treadgold
Okay, and engagement, right is a key word there. And that connects up to your previous comment about that question. Does it do any good? We’re doing all of this measurement of ESG risks, but doesn’t do any good. measuring outcomes is one way you mentioned engagement is there. So what are you seeing on the ground in terms of the managers that are doing as well? Or what frameworks are you looking for to do this the best?
Rachel Halpern
Well, we see a lot of organisations wanting to go straight to actions as opposed to taking a step back and thinking about what their beliefs are.
So I’d be looking for an organisation that had clearly articulated sustainability beliefs before anything else, because that flows down and justifies the actions underneath.
And then, you know, you’re looking for an overarching sustainability, investment policy, like how integrated is sustainability into investment analysis and decision making in macro views of the economy?
And then thinking about when you’re making strategic asset allocation, are you doing so in a long enough time horizon that takes account of sustainability?
I would separately and after that expect to see engagement policies and what’s a good engagement policy? I think it’s where the goals and the focus area of the engagement programme, they’re clear and written down, and they set out the levers that that organisation is prepared to use.
I mean, there’s no point just engaging and leaving that in vacuum. And then thinking about the measures of success of that engagement programme, that classic issue with engagement is you can’t necessarily claim causation. It could just be correlation of your engagement activity with the outcome of that company. Take my meaning.
John Treadgold
For sure. Now, that’s great. And I really appreciate you lining up those things in terms of sort of a flow, we often capture them all but but it’s rare that they sort of put in that that order. So that’s really useful. And then getting into some key elements. We’ve got issues of ESG data, right, lots of different data providers, some managers making ESG scores, their own bespoke proprietary ratings. How do you approach that? If you find lots of different groups using lots of different scoring taxonomies? How do you approach it and judge it?
Rachel Halpern
Yeah, I don’t buy into the criticism that ESG data is a waste of time because different houses come up with different scores. And certainly how we approach it at Jana is you’re looking for trends over time, consistent use of one score with trends over time will tell a story that’s valuable. But in terms of how we use data at Jana.
I think ESG risk is one type of data, and then there’s all these other data providers, you know, large and also niche, coming up with really important ways to measure real world outcomes. And then you’ve got SDG alignment data as well, which can be tied into EU taxonomy, green brown split of activities, but there are, you know, SDG alignment data is tricky, because it involves a lot of subjective decision making.
So for example, you might have a company who is rated by an SDG data house provider as aligned to the SDG of fixing world hunger. Now, I’ve seen an example that Domino’s is one such company. And I’m not saying whether or not they should or they shouldn’t be. But that’s a subjective judgement that Domino’s is fixing world hunger, right? SDG data needs to be reviewed with a grain of salt and looked at to inform the overarching picture of the portfolio’s impact, as opposed to reliance on particular, individual grains of data.
John Treadgold
The devil is in the detail, as always, and I think this is a really interesting transition. And this is, as you say, is it doing any good. I think this shift from relying on just ESG data to try and understand real world outcomes is the key here. And so, in measuring those outcomes, you mentioned SDGs, what’s ideal here?
And is it simply a shift toward impact investing? Or is that a broader piece there
Rachel Halpern
100%, not a shift towards impact investing in and of itself. I’m very pro impact investing, but thinking about impact as an asset class is not my preferred approach.
What we want to see is an increasing recognition that a portfolio, or an entire portfolio, has real world impact, whether or not you measure it, and also an appreciation that measuring that impact is not just you know, something that makes you feel good, but it can help you inform decision making in a more risk aware way, and also uncover investment opportunities. I’m seeing indications that asset owners and managers are moving in that direction. And certainly Jana is moving in that direction.
John Treadgold
Do you not need to be able to measure it, though? I mean, otherwise? Is it just a vibe? Or is it a factor of satisfying yourself?
Rachel Halpern
Oh, no, John, John, John, don’t misunderstand me, you know, absolutely, you need to measure it. I’m encouraging and setting up processes internally at Jana, for portfolios to be measured by their impact, but I want those scores to be taken with a grain of salt to be taken in the context in which they see it, I wouldn’t cherry pick the data, I would put it in the context of the broader portfolio.
John Treadgold
So let’s talk about net zero. This is a long term goal. People see it both ways. In some ways, it’s great that everybody’s engaged with it, we’ve at last got a target that everybody is able to engage with and plan for. But it is a long way away. And in some ways, the investment managers who are making the commitment won’t be in the job when that time comes around. And so there are pros and cons. How are you seeing managers engage with it? And how do you measure the transition process? What sort of milestones do you look for? Because in the end, I guess it’s not really the 2015 minutes that are what are you doing by 2025 and 2030?
Rachel Halpern
That’s what I was about to say. I mean, I don’t have a problem with the 2050 as a commitment, because as long as someone has an interim target of 2030 at the minimum and 2025 preferable, although there’s a benefit to a long term commitment, in that it produces more measured and sustainable actions towards achieving those goals, because you could achieve a low carbon portfolio that actually wasn’t necessarily aligned to the world, limiting global warming to no more than 1.5 degrees above pre-industrial levels. And what I mean by that is that you can make cuts to your portfolio tomorrow and slash your exposure to heavy emitting equities. But that means that someone else will be owning those equities and won’t necessarily have in place the engagement programmes and care about the environment and netzero in the way that you might, but your portfolio would be a lower carbon portfolio.
Certainly Jana has preferred approach is to be okay and confident enough to publish portfolio emission scores that are and remain, you know, relatively high and hard to abate sectors, but are trending down as a result of a really viable transition plans. We will only reach net zero with a whole of economy transition.
John Treadgold
Okay, so this divestment there, is this engaging on the clean energy transition. But another lever is regulation, like a carbon tax, how do you talk to clients about that? And would you ever sort of take a position on the benefits of a carbon tax for this goal?
Rachel Halpern
I mean, the way that we engage with clients on carbon credits and carbon taxes is that the regulation around it is extremely complex and murky, and there’s heavy regulatory risk involved. So yes, if there was a global unified system for trading carbon, I think that it would be a no brainer, that will be beneficial to our clients.
John Treadgold
Okay. And then not some, but it would be an imposition in terms of their portfolios,
Rachel Halpern
by in position, I guess you mean, costly. And I think that that just needs to be weighed in the long enough time horizon for climate risk to crystallise. So when you weigh it against that is a costly
John Treadgold
just factoring in in terms of regulatory risk and managing that,
Rachel Halpern
generally speaking, I would say that regulation in sustainable finance works best where, where it provides certainties of the market, simplicity, and comparability. At the moment, we don’t have any of those as it relates to carbon tax.
John Treadgold
Well, that’s all theoretical, isn’t it? So it is a difficult question for someone like you. So yeah, you know, I think it’s more trying to, at every opportunity include that in the levers for change that we have. And that is moving beyond your advice to clients and moving towards sort of the broader philosophical and economic model of how we can get to net zero by 2050.
Rachel Halpern
Certainly clients are asking for advice around the degree to which they should incorporate carbon credits in their portfolio or to offset their portfolio. And our advice is certainly cautious in that regard. And consistently with all of the netzero initiatives and Jana is a member of the consultants or consultants initiative, the advice and the best way to achieve Net Zero is reduce your emissions First, look at your portfolio first, reduce emissions and then offset what you cannot reduce. I’m sure you’ve had other I think I’ve even heard other guests on your podcast talk about the pitfalls of carbon credits in terms of additionality. And longevity quality.
John Treadgold
Well, that’s right. And we’ve seen how readily the rules can change, which I think it was two weeks ago, late on a Friday night when the detailed rules which I can’t rattle off, that did I think half the price, and so none of that is set in stone. And I think that does make that planning difficult. And
Rachel Halpern
that’s the regulatory risk that I was talking about before. That’s a regulatory risk crystallising that just a quick change.
John Treadgold
That’s right. We’ve talked about so many different elements here that are all evolving all the time, and come together to really reshape the world of finance, and you’ve found yourself in this role at Jana. You don’t have a predecessor, you’re pioneering the role. I’d be interested to understand what sort of skills does it take to fit your role and just help people understand the broader skills they might need, what to study at university to be something like an ESG analyst. And that kind of question which I get asked a lot.
Rachel Halpern
People reach out to me a lot as well and asking, and typically people who are really excelling in their fields that not sustainable finance, but might be adjacent as to how to get in. And I certainly don’t think that a CV full of sustainable finance labelled roles is a necessary item to make you successful. As a sustainable finance professional.
I would say, to answer your question, curiosity, it’s a constantly evolving field. Compassion is a surprising one, but I do believe it, if you’re in the role of sustainable finance, not everyone’s going to agree with you. And you can’t bring people on the journey if you don’t actively listen and have compassion for their point of view. Being dogmatic won’t necessarily make you successful in this role.
And then comfort being the only person in the room talking in trend-based language as opposed to necessarily relying on strong data points that are accurate that you know are accurate to the last 10th decimal place. You got to be comfortable with that because that’s sustainable finance.
John Treadgold
Very interesting. Yeah. Comfortable with perhaps of ambiguity, I’m not sure but yeah, being able to make decisions based on A trend and be comfortable with that. And do you think that that takes more confidence than having concrete numbers?
Rachel Halpern
It’s a confidence in yourself and an ability to rely on reasoned argument. I’m not saying don’t have evidence for your action, but we need to have conviction in our beliefs and act, even if the data isn’t 100%. Perfect.
John Treadgold
That’s right, that need to act right. If not making a decision is a decision. If you don’t make decision, someone else will make it for you. And that’s not leadership. So looking at your particular background, you were a lawyer. You went to LSE, London School of Economics studied behavioural science. You tell us a bit more about that pathway and the decisions you made?
Rachel Halpern
Well, yes, it’s circuitous, I studied law. I did that because I liked debating. And I liked making an argument. I thought that that’s what being a lawyer was, of course, when I practised, I realised it was more about attention to detail.
Obviously, that was character building. But it wasn’t my dream. But I was lucky enough to be on a really large fraud litigation case, at Clayton Utes. And then I moved to London with my husband and I got a job there after working at Clayton Utes as a financial crime investigator. And if I hadn’t done that fraud case, you know, one thing always leads to another. And that’s where I was investigating the likes of Barclays and post GFC, all the big global players, who was still behaving poorly and fixing LIBOR and FX exchange rates really great benefit to themselves and a great cost to society.
So I was focused on the cost of non-financial risks on society, like banking culture. And that leads me to why I studied at LSE, I took up the degree there because I was after a search for answers on as to why bankers behaved badly. I mean, I can continue the journey as to what got me here, if you like,
John Treadgold
Well, I just I mean, that obviously has such a clear linkage to ESG and non financial risk, and this evolution, and so you had that very tangible and very practical application of it, and understanding the private gain. But yes, please do continue. This is great.
Rachel Halpern
After a couple of years as a government, quasi government employee, while my husband was studying full time at the London Business School, I decided that I actually needed to get some money. Living in London’s not cheap, I was offered a job at State Street to help them improve their internal banking culture from a non-financial risk profile.
And that’s exactly it. That’s where I came to realise that ESG risks and sustainability risks are just another category of the risks that I’ve already been looking at. And I should say I said non-financial risk before but that’s obviously banking speak, that doesn’t make any sense
All risks are financial, if given long enough time horizon to crystallise. And that’s why I mean, fundamental to all of this has been trying to encourage financial industry to think in a more long term fashion.
John Treadgold
That’s right, nothing’s non-financial, it overcomes financial very quickly. And if you don’t see this such then it’s going to be even more painful when it suddenly crystallises. So you’re at State Street was that in the UK? Still?
Rachel Halpern
Yep. That was in London office. That was the head office, Europe, Middle East and North.
John Treadgold
Okay, and when did you when did you make your way back to Australia
Rachel Halpern
In 2016, it was a satellite office, so it wasn’t the head office. So Hong Kong is the head office at State Street in Asia Pacific, and my role was still regional, and meant to be kind of an equivalent role. But it just wasn’t as interesting. Being in a satellite office, I like to be in the cut and thrust of decision making.
So I thought to myself was the decision making happening in Sydney was the head office of big financial ships, and Westpac was the opportunity that came up and I moved there, but it was almost too big of a ship to move fast enough for my impatient brain. When the role at Jana came up, I absolutely jumped in it, because it’s just to me, it was such a clear opportunity to have impact, which has been delightful these past nine months.
John Treadgold
That you weren’t moving from the investment, the private side to being an advisor. But perhaps it was it was the scale that Westpac and the big four banks in Australia, are so unwieldy. But Jana’s relatively nimble, is that the attraction,
Rachel Halpern
That’s right, it’s a pretty rare organisation, that it’s only got 130 people, yet the potential for impact is huge, which is really satisfying from being the head of sustainability there.
John Treadgold
Okay, let’s talk a little bit more about that having an impact through the advice you can offer. And look that comes down to influence right. So how do you feel about that? What are the levers for change?
Rachel Halpern
Ah, well, I’m still learning them. But I mean, I could equally just be called, you know, head of change management. So, what are the levers for change? I think, I mentioned it before when I said, compassion for you know, active listening, really having a clear sense of where people are at and meeting them there. And I think having a very clear understanding and rationale for why you’re doing what you’re doing, personally, having your why almost plastered on your screensaver can help guard against the bombardment of daily activities that are urgent but not necessarily important. That’s a fundamental thing that I’m trying to do.
John Treadgold
And for other people that may be facing similar challenges, whether internal or external in terms of organisational change and adopting this shift towards sustainability? Do you sort of have any advice? I mean, obviously, having your wire very clear, the organisation at some level appreciates the importance of it.
But perhaps when you get down to those day to day personal interactions, there’s still some of the legacy the status quo ideals, especially in financial services industry, which is pretty tough to get moving. Is that sort of the right way to frame? And do you have any advice for people to push through it?
Rachel Halpern
That’s fair, I don’t want to be on a pulpit giving advice necessarily, because it’s still something that I’m working through. But I think it’s clear that the best way to work through this is to provide space for conversations so that everyone’s voice feels heard, and that this is not something that, you know, any sustainability function shouldn’t happen, won’t be successful, if it occurs in you know, a corner of the office needs to be integrated throughout everyone’s day to day role.
And, and so that means talking to people all the time, about their day-to-day role and understanding what their concerns are, and understanding, even if they are fully bought into your message, what are the practical things that are stopping them or make it harder for them to get on board with your why? And then working to you know, really follow up and change their environment and make it easy for them from a behavioral science point of view? Change the environment, make it easy?
John Treadgold
Yeah, I look, that’s great. And look, that’s what I tried to do here, active listening, telling the stories, bringing voices like yours out, and people can hopefully absorb some of that and have their own conversations.
And to help those same people, if you have a book recommendation, maybe something that helps you in sustainability, or even, it’s just something on that side table.
Rachel Halpern
It was my birthday recently. And actually, I’m loving a book that someone gave me for my birthday, called the leading edge, dream big spark change and become the leader of the world needs you to be by Holy ransom. I confess I’m not sure if I can make a proper recommendation because I’m only about a fifth of the way through it. But I’m loving it. So
John Treadgold
Holy ransom. Great. Yeah, she’s a well known Australian doing lots of good things.
Rachel Halpern
It helps with practical ways to lead change in an organisation. Well, look,
John Treadgold
thank you for this, Rachel, I think, look, some people out there probably do appreciate what an asset consultant does that for those that don’t this might be a good insight into the role that the intermediary role that it plays between investment managers and investors. So that’s great. And look, thank you. Keep on driving the change that you do so well, and hopefully we can talk again soon.
Rachel Halpern
Thanks, John. I really appreciate it.
