“When I can see the penny drop that sustainable investment is about recognising the investment signals and getting better outcomes for their clients, it is very exciting.”

FAVOURITES – 15 July 2010 – Amanda McCluskey is a woman on the move – literally. When she did this interview with The Fifth Estate she was walking between engagements, on her way to an international corporate governance forum, and later attending a forum on the United Nations Prinicples for Sustainable Investing.This is how she likes it – fast moving and thinking on her feet.

It is no surprise that McCluskey, sustainability manager for Colonial First State Global Funds Management, ended up as a sustainability crusader.

Passionate about environmental issues since she was a child (she chose to write about the Exxon Valdez oil spoil for one of her first primary school projects) she went on to study environmental economics and international relations at the University of Sydney.

Instead of attending her graduation ceremony, she joined a protest outside the AGM of a prominent Australian company that was performing badly on environmental issues.

“It was a very exciting thing to do. I was a ratbag student passionate about a cause. But the company was influenced by the protest and later sought input from their investors on how they could change the way they operated.

“Twelve months later I was across the table from one of the people from that company talking to them about how they could manage their ESG [environmental, social and governance] issues,” says McCluskey.

The difference on that occasion was that she was crusading from the inside. By then she had joined BT Governance Advisory Service and was advising companies about their exposure to environmental and governance issues.

“I had aspirations of working in international aid or overseas development projects but this wasn’t to be. Once I graduated I hassled Westpac until they gave me a job and was lucky enough to end up working with Erik Mather at BT. He was a bit of a leading light in ESG and I got wonderful experience in pushing the importance of ESG issues in investment performance.”

McCluskey then took up a role in Melbourne with funds management firm, Portfolio Partners, which provided her with valuable experience in managing money.

“Portfolio Partners was the first, as far as I know, to bring sustainability issues into the mainstream investment process.

“We were short selling companies that performed badly on ESG issues. This really encouraged the integration of these issues into the investment process.”

With some investment management under her belt McCluskey moved back to Sydney to join Colonial First State Global Funds Management as sustainability manager. She feels that her time at Portfolio Partners armed her with the skills to work closely with investment managers to bring about change in mainstream investment practices.

“One of the really exciting things now is that instead of investment managers just having to act on gut feel when investing sustainably, we are starting to put some metrics around it. We are able to make sustainable investment quantifiable.

Convincing the sceptics

But there are still a lot of sceptics out there – not only on the importance of sustainability in investment processes but also on climate change, says McCluskey. Changing their minds is one of the most challenging and satisfying aspects of her job.

“It is very satisfying when I can see I’ve convinced someone who’s been sceptical. And there are still a lot of sceptics who think that taking ESG issues into account is just about saving the environment. Mainstream investment managers almost universally think that taking sustainability into account is just making their job harder, says McCluskey.

“When I can see the penny drop that sustainable investment is about recognising the investment signals and getting better outcomes for their clients, it is very exciting.”

Things are changing though, particularly at the wholesale investment level. Superannuation funds have signed up to the United Nations Principles for Responsible Investing

Super fund trustees are acutely aware of the importance of ESG issues in investment outcomes. But, when you drill down to the investors and mainstream investment professionals there is not the same level of buy-in, McCluskey says.

“It takes a long time to change a culture. My role is advocate for cultural change and I get a great opportunity to do that with Colonial. Fifty percent of my job is to work internally with our investment team and fifty percent is to work with the broader industry.

The property industry, says McCluskey, is one of the most sophisticated when it comes to understanding and implementing sustainability.

The property industry, says McCluskey, is one of the most sophisticated when it comes to understanding and implementing sustainability. Photo: Tasman Miller

“Sustainability is a very tangible thing for property and there is so much collaboration within the property sector through organisations such as the Green Building Council and instruments such as NABERS.

“The best thing for property right now would be if all super funds put the right amount of value on sustainable property investments. It is happening but there is still a way to go.

Future challenges

Anyone talking to McCluskey about her job would not doubt her commitment so it is surprising to hear that one of her biggest challenges looking forward is to stay optimistic.

“Probably the most challenging thing for me at this point is to stay optimistic and make sure I stay on message and yet also adapt the message as things change.

“Ten years out of university and working in this area all that time it is very important not to get jaded. This is a matter of recognising that cultural change takes time and not get too frustrated.

One thing that helps here is the diversity of the work at Colonial First State.

“There are always interesting new directions for me here and I am always learning something new. One area that I am very interested in is taking the sustainable investment message to emerging markets and economies. This presents different cultural and regulatory dimensions.

“I want to use the leadership position Australia has in this area to work with our closest neighbours in emerging markets to raise the bar. Luckily that is part of Colonial’s pipeline so I’m very fortunate.”

And, reflects McCluskey things really have come a long way since her first job with BT when clients would constantly mistake the word “governance” for “government”.

“People just had no idea what you meant by governance. Now you can’t read a paper without seeing it mentioned. Things have changed so much in that time and it will also happen for sustainable investment. It will be accepted as financially viable,” says McCluskey.

lblundell@thefifthestate.com.au