Allianz Global Investors has reduced its exposure to UK water companies due to risks associated with them dumping sewage in waterways, an executive at the firm said as the company ramps up its nature-related engagement.
The asset manager cut back an undisclosed amount of investment in firms it would not name before the news story began to gain momentum in the country, said Mark Wade, head of sustainability research and stewardship at Allianz GI.
“We could see an imbalance between the financial achievement and the non-financial achievement,” Wade told Carbon Pulse.
“We have been working on the biodiversity and water thematic for several years. We knew this was a topic that was bubbling under.”
UK water companies have faced widespread criticism for polluting rivers and beaches with untreated sewage. They have been fined more than £140 million since 2015.
“There are some good companies and there are some bad companies. This one was an area where there was definitely room for improvement,” Wade said.
UK water pollution has been a notable topic since 2015 but the “heat really came on” last year following the publication of a picture of sewage from a Cornish beach, Wade said.
That year, the asset manager summoned the CEO and CFO of a UK water company to Allianz’s office following the news coverage, Wade said.
“It was about: ‘What’s your perspective on it? What are you doing about it? What’s your trajectory? What can we expect the next year?’”
The water executives argued they were reducing pollution levels, Wade said. “We were saying: ‘Clearly not enough.’”
“It’s about being in a situation where you’re able to push and make it very clear that this is the basis on which we can invest.”
“We will maintain constant dialogue. There are avenues to escalate, like voting against remuneration or board director appointments,” he said.
Munich-headquartered Allianz GI, which managed €520 bln in assets at the end of June, has “low” exposure to UK water companies, Wade said.
Allianz’s Global Water fund, launched in 2020, managed €1.06 bln at the end of July, according to a factsheet. None of its top 10 holdings included UK water companies. The top three stocks were Geberit, Pentair, and American Water Works.
Water-related issues can cause “very significant physical risks” with consequences that can “quickly turn into a risk factor for a licence to operate”, Wade said.
Allianz GI as a company intends to engage in a “much more structured way” across biodiversity than it has done previously, Wade said.
“There will be points where we do divest. Where possible, we like to ensure that we can escalate as much as possible to push for better outcomes.”
“There will be an increased level of engagement undoubtedly.”
By Thomas Cox – t.cox@carbon-pulse.com
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