Natixis chief targets ESG strategies

Louise Watson was recently appointed head of Natixis Investment Managers Australia and NZ. She talks about what it took to get the top job but also how APRA's performance test is shaping the strategies super funds can adopt.

You have just been appointed as country head for Natixis Investment Managers in Australia and New Zealand. Was that always your career goal?

When I moved into asset management in 2007, I saw a long and satisfying career ahead. It took many years of listening and learning and having great mentors along the way to give me the confidence that I could get here.

My journey was different from most others in the sector. I started out in equity capital markets working on a trading floor in a client-facing role which is very different from working in funds management and distribution.

For me, it was great to have that technical experience of being a practitioner in markets and experiencing how markets move, what drives them. Being at the coalface has given me a great background.

I have always wanted my career to be varied. I never thought of a career as linear. I've never had a set path. I kept layering on the experience so by the time I got to a country head role I could draw on all those layers.

I have always been open to opportunities. Importantly, I said yes to everything.

Are you seeing more diversity in funds management?

Most definitely. More than half of our APAC executive management committee are women, and on the international distribution business, we currently have slightly more women than men in APAC - 51 percent to be specific. Further, we are starting to see more female applicants at the grassroots. 

For me, it is about opening up finance and removing the perception that it is not relevant for everyone - that you can have a very varied career in this industry whether you are creative or numbers-driven. Both sets of skills are applicable, and we encourage diversity of thought.

Gender has been one of our main focuses. The university programs we participate in and the graduate programs that we run in Australia have allowed us to mentor a very diverse set of people.

It's also a focus for our affiliates. For example, our private investments affiliate, Flexstone Partners, are signatories of the Gender Equality Charter, which, requires specific quantitative gender balance objectives to be met by 2030. They've also set a target for women to represent 40 percent of the investment teams by 2030.

Removing the barriers to finance is one of the ways we can get diversity of thought as well as diversity in gender and ethnicities. It's important to say to people that finance is a field where your passion, energy, and motivations are welcome.

The important message is that the door is open to talent, and enquiring minds.

Turning to Natixis's global sustainable equities strategies, offered via Mirova, how are your clients managing given the restrictions of the Your Future, Your Super performance test?

Does the test encourage super funds to avoid investing in ESG given that those tracking at the lower end of that performance test are loath to move away from the benchmark? 

What solutions is Natixis offering clients that meet ESG and YFYS criteria?

Recently, we saw APRA construct and institute benchmarking tests on the performance of super fund's MySuper products.

YFYS is shaping how superannuation funds can assess new strategies in a world where they are now much more focused on benchmarks and performance.

Funds that are concerned about failing the performance test are being selective about how and when they move away from the benchmark.

Historically speaking, there's been a perception that there's a trade-off between performance and taking an ESG approach to investing.

However, our experience with Mirova is that they meet this dual objective and as super funds understand and seek to learn more about ESG strategies, their confidence grows.

Where funds have performed well in the performance test, they may have more appetite to explore new opportunities that are less benchmark aware.

Clients are now finding themselves operating within YFYS, meaning they're doing the fundamental analysis on their portfolio to identify how they're positioned within the new parameters and how they will interact with the benchmark as they assess new strategies.

We're not finding that YFYS is stopping superannuation funds from exploring ESG strategies. What we are now seeing is dedicated ESG strategies making their way into the balanced option and not just in the ESG option.

That's why Natixis has seen success with the Global Sustainable Equity strategy from Mirova, our responsible investment.

We have long advocated for a dedicated, socially responsible investment manager to sit in the main global equities pool within the balanced fund option. In the past, responsible investment has lived in the ESG option within a fund, but that has changed. ESG strategies are also making their way into the real asset space, particularly in private equity.

Our clients are also implementing net-zero targets for 2050, and are assessing their progress along the way - at 2030, and 2045. They are looking at the way forward and are seeking strategies that will help them meet their targets and help them decarbonise their portfolio. 

ESG investing is so well aligned to the long term nature of superannuation and we are seeing great symmetry between the goals of super and those of investors who are increasingly looking to leave a legacy and to be part of powerful change.

Mirova and members really understand the value of investing in innovations that offer solutions to demographic, environmental, technological, and governance-related transitions that are shaping the global economy.

Ultimately, Mirova believes companies that are positively exposed to these long-term secular trends will experience economic tailwinds, whereas companies that are unable or unwilling to address them will experience business model risks over time.

How else are you supporting clients with YFYS?

We are in constant dialogue with superannuation funds about what's working and where the pressure points are. Funds are in a more introspective state of mind.

We're encouraging larger super funds to invest and continue to collaborate on critical assets in Australia and offshore such as industrial healthcare, cold storage, gas, water, medical data centres, and key real estate assets.

This will not only be important to the domestic economy's recovery post-covid but also in generating momentum in the economy, to stoke the fires so to speak, and continue to move Australia forward.