Our role as an asset owner

Guy’s & St Thomas’ Foundation is an independent foundation which backs people and ideas to drive more equitable health.

In 2022 we set a new strategy for our c.£1 billion endowment implementing a dual mandate of health impact alongside attractive risk-adjusted financial returns that are used to fund our charitable activities. We also set ambitious responsible investing goals in areas like climate, diversity and broader responsible investment (RI).

Our commitment and determination are backed by our endowment which allows us to take a long-term view, whilst tackling the real and urgent health challenges of today.

The main tools we use to deliver on our mandate are:

• our dedicated impact investing portfolio; integrating environmental, social, and corporate governance (ESG) and health into our property portfolio, and
• responsible investment, including engagement, in the main financial portfolio. This comprises roughly 60% of our endowment.

We want to use our engagement to drive and support the companies we’ve invested in to make positive changes related to health and wider responsible business and invest in funds aligned with our mission to invest in a healthier society.

We have been seeing progress, opportunities and challenges across our engagement work.  

We’ve had success in engaging food companies to improve the healthiness of their products and in assessing the alignment of our portfolio with net zero. We have also helped set up Long Term Investors in People’s Health (LIPH), a global alliance of investors prioritising health.

However, the lack of data on companies’ Net Zero plans has made it challenging for us to go as far as we’d like on climate. We also still have more to do on engagement with our investments on diverse representation in their businesses.

So, what have we learned so far?

1. Use time and resources to target and maximise impact

You can’t do everything at once, so be smart about it. Positive impact takes time and effort. We were part of a collaborative engagement with Unilever which saw them commit to industry-leading transparency on nutrition. This took a lot of our time and resources, which meant we had less time for other priorities. Ultimately it was worth it, with Nestlé following suit, but the experience reaffirms our belief that effective engagement requires continual dialogue, and we need to allow the time to make it happen.

2. Engagement as an asset owner is not always simple

Like most institutional investors, we invest in funds managed by asset managers (meaning we don’t have direct access to companies). Furthermore, our voice is just one of many invested with that asset manager. This can make submitting proposals to companies and broader engagement with them difficult. New solutions are clearly needed to support asset owners to have closer engagement with their investments.

 3. Climate matters but we need better data to do more

There has been an improvement in the availability of emissions-related data in recent years, but many companies still are not reporting it and when they are, they are not reporting information which tells us if they are taking the necessary steps to transition to net zero. We’re having to use a combination of methods to get the data we need to make evidence-based decisions. Through detailed analysis and the help of our consultants Partners Capital, we’ve made good progress by measuring the alignment of most of our public equity portfolio, but we also need to do the same for our private assets. Net-zero is the industry’s highest priority at the moment, and we need the data to support this.

4. Getting the most out of the data you have

There is no shortage of data but it’s not always decision useful. This is not just an issue confined to climate – we’re also seeing this issue in other responsible investment areas including health. The challenge is in obtaining the right data that we need in order to make the most impact. That’s why we are taking steps like: 

• Providing guidance around metrics needed in the LIPH’s Investor Guide on Health, 
• Joining an asset owner working group coordinated by the Institutional Investors Group on Climate Change (IIGCC) which hopes to provide consistency and standardisation to disclosures on climate by asset managers to asset owners, and 
• On nutrition, encouraging companies report on the healthiness of sales using a government-endorsed definition ensuring consistency in their reporting.

5. We are still figuring what works best – influencing change from within vs moving to funds that are already there.

The debate about whether to exclude investments in companies that don’t meet an investor’s responsible investment standards or engage with them is long-standing. However, this tension also plays out when asset owners are deciding which fund managers to invest in or engage. For areas like diverse leadership representation in investment funds we’re currently assessing how we best approach this. 

For example, we know that currently 13% of our fund managers have over 50% women or ethnically diverse individuals in their investment committee and/or ownership structure. This is a low figure but is sadly representative of the lack of diversity in the asset management industry today.

Is it more impactful to improve our existing managers performance on diversity or to choose new managers that are more diverse? The answer is probably a mix of the two, but it is far from clear-cut and plays out in all other responsible investment areas. 

What’s next?

We have a year of opportunities ahead. At the Foundation we’re driving our investor engagement by: 

• Prioritising engagement with our fund managers and looking at what metrics matter most. 
• Looking at how we can better measure our impact, including against the UN Sustainable Development Goals. 
• Growing our engagement work in new areas like air pollution with a direct link to health.