OTPP’s Sustainable Investing Chief Welcomes Anti-ESG Sentiments
The global head of sustainable investing at Canada’s Ontario Teachers’ Pension Plan (OTPP), Anna Murray, said she had finally come to terms with the anti-ESG sentiment that is floating around in certain investment circles.
In the world’s most important capital market, the US, responsible investment has become a politically charged topic. The nation’s market regulator, the Securities and Exchange Commission (SEC), last month stayed the implementation of its climate-related disclosures by public companies in the face of multiple legal challenges from attorneys general of several Republican-led states.
Speaking just across the border at the Fiduciary Investors Symposium held at the University of Toronto this week, Murray conceded that she has spent the last number of years feeling “defensive” against the anti-ESG sentiment, but now, she “very much welcomes it”.
“I think it’s a blessing in disguise, in that it’s made all of us very focused on removing the labels and [recognising] what we’re really talking about [around sustainability] as a set of growing and material risks that is just fundamental to our fiduciary duty,” she told the symposium.
“One of the challenges I think that we are experiencing – if I could call us collectively as an industry – is around emissions intensity, and the absolute focus on that as the sole measure of progress.
“While it’s a very important measure, of course, I think we can all recognize that perhaps it’s an imperfect measure, it is backward looking.
“[I am] hoping to see the discussion starts to evolve more to include the ability to identify and capture these investment opportunities, as opposed to just focusing on the emissions portfolio reduction.”
It is a sentiment echoed by Hendrik du Toit, founder and chief executive of international asset manager Ninety One, who said that ESG considerations have become an integral part of modern investing.
“[The ESG team] are not the people in the corner next to the compliance team. They’re actually embedded in the investment teams, and they are in the leaderships of the firm,” du Toit said.
Despite all the negative narratives around ESG, du Toit said the area is still witnessing an unprecedented level of international collaboration.
“It’s very significant that the US government and the Chinese government, which don’t really talk a lot, have their climate channel absolutely open… which is not often publicized,” he said.
“There are things happening that we should celebrate as well.”
However, not one to mince words, du Toit said the asset management industry has done “a pretty abysmal” job in quantifying the transition risk, and it’s disappointing to see the world’s inability to even mobilise 1 per cent of its capital per annum to finance the transition.
“We as an industry are collectively incredibly stupid sometimes,” he said. “We had a decade or five years of literally free money – what did we do with that? We threw it at tech we don’t really need to use.
“What can we do as asset managers, besides pricing securities, is we can actually mobilise capital to invest behind the most important investment opportunity of our generation.
“All we try to do is encourage the companies we invest in to maximise their value by recognising the transition risk – ie developing real world plans to protect the equity value, and contribute to a world which is livable. It’s really as simple as that.”
With C$750 billion in assets under management, BNP Paribas Asset Management has committed 50 per cent of them to 10 net zero objectives, spanning across equity and credit corporate investments and some private assets.
The firm’s global head of sustainability Jane Ambachtsheer said the anti-ESG move is evidence of impact.
“A lot of the pushback we’re seeing today in the market is actually… because we’re pushing in uncomfortable places,” she said.
“I think a lot of people are waiting for rates to come down and then we’ll see clean energy investment deployment pick up and become more attractive.”
While pension and sovereign funds have positioned themselves well in private markets to harvest clean energy opportunities, Ambachtsheer said “the big question will be on the public [market] side”. And the performance there hasn’t really been glowing, as the S&P Clean Energy index was down 15.63 per cent on an annualised total return basis in the past three years.
“A lot of people are looking at that and pointing to that as a proof point that sustainable investing has had its run the last three or four years, and now we’re moving on to something else,” Ambachtsheer said.
“That’s not our perspective. Investing in clean technology and renewables is one piece of an overall broad diversified approach to thinking about the transition, and looking for the right kind of pricing and opportunities is an important element of that.
“On the stewardship side, we voted against 1000 management resolutions last year because we weren’t happy with what the companies were reporting on climate.
“So there are certain things that you can just measure year over year and report on, and I think understanding what investors want to achieve around net zero and helping them align with that is really a big part of our commitment.”
Let me begin by stating my biases, there's so much nonsense in ESG that I find it extremely frustrating reading the plethora of articles covering the topic.
Half the time I cringe, the other half roll my eyes and think to myself: "Do people in the investment world actually believe this fluff?"
No, there's nothing wrong with ESG, what bothers me is when this label is thrown around loosely to garner attention and when hard scientific facts are ignored, all in the name of promoting some globalist green agenda.
The world is heading toward net zero but the transition to net zero won't be linear and it will be full of economic and social potholes.
And the focus of pension funds and other asset managers needs to squarely be on opportunities in the transition economy.
All this to say, I agree with OTPP’s sustainable investing chief Anna Murray when she states:
“One of the challenges I think that we are experiencing – if I could call us collectively as an industry – is around emissions intensity, and the absolute focus on that as the sole measure of progress.
“While it’s a very important measure, of course, I think we can all recognize that perhaps it’s an imperfect measure, it is backward looking.
“[I am] hoping to see the discussion starts to evolve more to include the ability to identify and capture these investment opportunities, as opposed to just focusing on the emissions portfolio reduction.”
In my opinion, and this is my opinion, way too much time has been wasted on the emissions portfolio reduction and not enough discussions on where pension funds can invest to make a significant contribution to the transition economy.
If it were up to me, I'd go nuclear on the pension industry and tell them enough dithering, let's open discussions with the federal government and figure out how Canada's large pension funds can invest in new nuclear energy projects to make a meaningful and long-lasting impact on climate change.
I'm aware that experts are divided on nuclear energy (what else is new?) but really smart people get it:
As the world pushes toward its goal of net-zero emissions by 2050, nuclear power has been touted as the way to bridge the energy gap — but some, like Greenpeace, have expressed skepticism, warning that it has “no place in a safe, clean, sustainable future.”
Nuclear energy is not only clean. It is reliable and overcomes the intermittent nature of renewables like wind, hydro and solar power.
“How do you provide cheap, reliable and pollution-free energy for a world of 8 billion people? Nuclear energy is really the only scalable version of that, renewables are not reliable,” Michael Shellenberger, founder of environmental organization Environmental Progress, told CNBC.
Governments have started to pour money into the sector after years of “treading water,” according to a report by Schroders on Aug. 8.
According to the report, there are 486 nuclear reactors either planned, proposed or under construction as of July (2023), amounting to 65.9 billion watts of electric capacity – the highest amount of electric capacity under construction the industry has seen since 2015.
Think big, think scalable, think nuclear. That's my motto.
Solar & wind are fine but it's all window dressing.
How can pension funds take part in the new nuclear revolution? Well that's an entirely separate conversation that requires political backing.
What else? I agree with Hendrik du Toit, founder and CEO of Ninety One, the asset management industry has done “a pretty abysmal” job in quantifying the transition risk, and it’s disappointing to see the world’s inability to even mobilise 1 per cent of its capital per annum to finance the transition:
“We as an industry are collectively incredibly stupid sometimes,” he said. “We had a decade or five years of literally free money – what did we do with that? We threw it at tech we don’t really need to use.
“What can we do as asset managers, besides pricing securities, is we can actually mobilise capital to invest behind the most important investment opportunity of our generation.
“All we try to do is encourage the companies we invest in to maximise their value by recognising the transition risk – ie developing real world plans to protect the equity value, and contribute to a world which is livable. It’s really as simple as that.”
Nothing is simple in asset management and ESG and sustainable investing is a case in point.
As far as BNP Paribas Asset Management global head of sustainability Jane Ambachtsheer stating this:
“I think a lot of people are waiting for rates to come down and then we’ll see clean energy investment deployment pick up and become more attractive.”
While pension and sovereign funds have positioned themselves well in private markets to harvest clean energy opportunities, Ambachtsheer said “the big question will be on the public [market] side”. And the performance there hasn’t really been glowing, as the S&P Clean Energy index was down 15.63 per cent on an annualised total return basis in the past three years.
“A lot of people are looking at that and pointing to that as a proof point that sustainable investing has had its run the last three or four years, and now we’re moving on to something else,” Ambachtsheer said.
“That’s not our perspective. Investing in clean technology and renewables is one piece of an overall broad diversified approach to thinking about the transition, and looking for the right kind of pricing and opportunities is an important element of that.
I'm not sure if rates will decline sufficiently to see clean energy deployment pick up but there will be a lot of opportunities in public markets in clean energy going forward.
For example, here is one of my favourite clean energy companies and its share price is on fire this year:
Alright, before I wrap it up, OTPP recently announced a $300 million investment in DeepL, a leading Language AI company:
COLOGNE, GERMANY – May 22, 2024—DeepL, a leading Language AI company, today announced $300 million of investment at a $2 billion valuation. Led by Index Ventures, the heavily oversubscribed round attracted strong support from new investors, who will bring their extensive expertise, connections, and resources to support DeepL’s growth and long-term vision to transform the way companies communicate around the world. Additional late-stage investors, including ICONIQ Growth, Teachers’ Venture Growth, and others, also participated, along with existing investors IVP, Atomico, and WiL.
“We’re approaching an inflection point in the AI boom where businesses who are racing to adopt the technology begin to discern between hype versus solutions that are secure and actually solve real problems in their business,” said Jarek Kutylowski, founder and CEO of DeepL. “This new investment comes during what is on track to be DeepL’s most transformative year yet and is a testament to the crucial role that our Language AI platform has in solving the complex linguistic challenges global companies face today. We’re highly focused on continued growth and innovation to expand our solutions and ensure they remain industry-leading in terms of quality, precision, and security. This will bring us closer to a future where every company, regardless of location, can operate seamlessly on a global scale with our AI.”
The new investment comes during a period of significant growth and momentum for DeepL, which has amassed a customer network of 100,000+ businesses, governments, and other organizations worldwide. This network includes Zendesk, Nikkei, Coursera, and Deutsche Bahn, who rely on its highly accurate and secure enterprise Language AI platform to deliver seamless communication, driving international growth and cost savings. In response to surging demand from global enterprises, DeepL has accelerated its expansion efforts and strategic investments into key markets over the past year. In January 2024, DeepL deepened its commitment to the U.S.—now its third largest market—by opening its first office in the region. The company continues to expand its team in the U.S. to support growing demand.
Within the last 12 months, DeepL has also substantially broadened its product offerings tailored for businesses. In April 2024, the company launched DeepL Write Pro, a writing assistant specifically tailored for business writing, powered by its own proprietary LLM technology. The company also continues to expand the range of languages supported by its platform with the recent additions of Arabic, as well as Korean and Norwegian, bringing its total number of languages to 32.
“DeepL’s runaway success is a bit of an ‘open secret’ in the business community,” said Danny Rimer, who led the investment from Index Ventures. “The company is exceptionally thoughtful about creating cutting-edge AI products that deliver real and immediate value to their customers. Jarek and the rest of the DeepL team are equally research and commercially minded – both of which are key to the company’s success.” Index Ventures is recognized for its investments in highly successful SaaS businesses like Slack, Wiz, and ScaleAI.
Demand for AI solutions among global enterprises is on the rise. A recent IBM study found that 42% are already actively deploying AI and 40% are exploring its potential. Within this rapidly evolving landscape, DeepL is leading the way in applying AI to transform the $67.9 billion language industry, which is projected to grow to $95.3 billion by 2028.
Since its inception in 2017, DeepL has become the Language AI provider of choice for businesses across multiple industries including manufacturing, legal, retail, healthcare, technology, and professional services. The company’s specialized Language AI platform has become a critical investment for global businesses today, addressing a variety of communication challenges ranging from internal communications to customer support and international market expansion. Unlike general-purpose AI systems, DeepL’s cutting-edge translation and writing solutions rely on specialized AI models specifically tuned for language, resulting in more precise translations for a variety of use cases and a reduced risk of hallucinations and misinformation. In business translation and writing, accuracy is paramount, making specialized AI models the most reliable and preferred solution for language challenges.
DeepL’s Language AI platform is also proven to drive significant cost savings and efficiencies. A 2024 Forrester study revealed that the use of DeepL delivered 345% ROI for global companies, reducing translation time by 90% and driving a 50% in workload reduction, underscoring, in our opinion, the power of its platform for businesses looking to grow their revenue and enter new markets faster and at scale.
“At Zendesk we see first hand the power of infusing AI tools into customer experience, and DeepL’s industry-leading translation is a prime example,” said Adrian McDermott, CTO, Zendesk. “The ability to have accurate AI translation allows companies from startups to large enterprises the ability to scale globally, reaching prospects and existing customers in new ways. Zendesk’s open and flexible platform allows for seamless partnerships, and the tangible results we’ve seen so far from joint customers have us looking forward to continued work with DeepL.”
Looking ahead, DeepL will continue to invest in research and product innovation to strengthen its suite of leading AI communication tools for businesses. The company is also doubling down on global market expansion and talent recruitment across multiple areas including AI research, product, engineering, and GTM.
About DeepL
DeepL is on a mission to break down language barriers for businesses everywhere. Over 100,000 businesses, governments and other organizations and millions of individuals in 63 global markets trust DeepL’s Language AI platform for human-like translation and better writing. Designed with enterprise security in mind, companies around the world leverage DeepL’s AI solutions that are specifically tuned for language to transform business communications, expand markets and improve productivity. Founded in 2017 by CEO Jaroslaw (Jarek) Kutylowski, DeepL today has over 900 passionate employees and is supported by world-renowned investors including Benchmark, IVP and Index Ventures.
If you think there's a lot of hype in ESG, don't get me started on the hype in AI.
I agree with Jarek Kutylowski, founder and CEO of DeepL: “We’re approaching an inflection point in the AI boom where businesses who are racing to adopt the technology begin to discern between hype versus solutions that are secure and actually solve real problems in their business."
It's all about outcomes, enhancing productivity and ROI, the rest is AI fluff and nonsense.
Below, Michael Shellenberger, founder of Environmental Progress, says “the problem with renewables is that they’re reaching their limits in many countries.”
And John Fortt speaks with DeepL CEO Jarek Kutylowski about language translation, AI, and his entrepreneurial journey.
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