#16 Steve Watters: Can investing drive real change? How Paradigm Norton aims to be a force for good.

In this episode, Philippa talks to Steve Watters about what it really means for a financial planning business to be a force for good, why excluding the worst offenders from a portfolio isn't enough on its own, and how stewardship and engagement can change the conversation between investors and the companies they own.

Steve Watters is Head of Impact at Paradigm Norton. Trained as an engineer, he spent much of his early career in international development and charitable work in East Africa, Palestine and Israel, before joining Paradigm Norton in 2018 as the firm was preparing to become a B Corp and transition to employee ownership. He now leads on impact across the business, sits on the Investment Committee, and has been recognised as Sustainable Finance Leader of the Year at the Global Good Awards. Paradigm Norton has also recently been awarded the King's Award for Sustainable Development.

In this conversation, you'll hear about:

• What a Head of Impact actually does, and why the role spans operations, suppliers, governance, people, clients and investments rather than sitting neatly in one corner of the business.
• Why Steve joined Paradigm Norton at the moment it was becoming a B Corp and moving to employee ownership, and what those two structural changes have unlocked.
• The "underwear drawer" reality of going through a B Corp assessment, and how Paradigm Norton's recertification in 2023 saw its score jump from 85 to 148, recognised as the biggest improvement of any UK company that year.
• Why the carbon footprint of advice given to clients dwarfs the footprint of running an office, and what that realisation triggered.
• The design of Paradigm Norton's responsible portfolio (PNr), built to match traditional returns while using ESG screening alongside active stewardship and engagement.
• The shift from responsible investing as a niche, opt-in choice to becoming the firm's default portfolio, with more than 60 percent of clients now invested this way.
• The academic case for engagement over exclusion: why simply screening out bad companies has limited evidence of driving change, and why taking the majority of companies through a transition matters more.
• The football analogy of "playing at home": why a market full of patient, long-term, engaged investors raises the chances of companies making better long-term decisions.
• The honest acknowledgement that stewardship is the best lever available to investors, but it is not a panacea on its own - policy change and other actors are needed too.
• The framework Paradigm Norton uses to assess asset managers, including team expertise, fund methodology, AGM voting records and the case studies of real engagements with companies.
• The intentional portfolio (PNi), built with Tribe Impact Capital, for clients who want to go further and invest in companies whose revenues are aligned with the UN Sustainable Development Goals.
• The upcoming Bristol screening of the National Emergency Briefing film featuring Chris Packham, why Paradigm Norton is hosting it, and the kind of conversations it hopes to open up with the wider business community.

Key takeaway:

Steve's argument is that the financial system is one of the most powerful enablers (or disablers) of the change we need to see, and that financial planning firms may have far more agency than they often admit. Real impact doesn't come from a single label or a marketing line. It comes from rewiring the business itself, asking harder questions of the funds you use, taking clients on the journey with you, and accepting that this is a starting point rather than a destination. Honesty is the throughline: refusing to overclaim, sitting with the discomfort of the hard questions, and being willing to keep asking what else can be done.

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Disclaimer:

This podcast is intended to be of a general nature, will not be suitable for everyone, and should not be treated as a specific recommendation. We recommend taking professional advice before entering into any obligation or transaction.

PNr portfolios adopt a diversified, cost-efficient approach aimed at maximising risk-adjusted returns. As a secondary consideration, the portfolios prioritise selecting fund managers who effectively engage with underlying companies on environmental, social and governance (ESG) matters. Most underlying funds also incorporate ESG factors and exclusions into the fund construction. PNr portfolios are not designed to achieve specific sustainability outcomes and should not be viewed as “sustainable” investments.

PNi portfolios take a more targeted sustainability approach, seeking closer alignment with defined environmental and/or social outcomes, and which are predominantly defined by UN Sustainable Development Goals (SDGs).

Definitions of ethical investing vary, and incorporating ESG or sustainability factors does not guarantee positive outcomes or investment performance. The value of investments can fall as well as rise, and you may get back less than you originally invested. The suitability of any investment will depend on your individual circumstances.

Paradigm Norton Financial Planning Limited is authorised and regulated by the Financial Conduct Authority.

Our FCA Register number is 455083.

Registered in England. Reg No 4220937, VAT Reg. No 918550904.

This podcast is intended to be of a general nature, will not be suitable for everyone, and should not be treated as a specific recommendation. We recommend taking professional advice before entering into any obligation or transaction.

Paradigm Norton Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Our FCA Register number is 455083. 

Registered in England. Reg No 4220937, VAT Reg. No 918550904.

Transcript

SPEAKER_02 0:02

I'm Jennifer Hamm, CEO of Paradigm Norton, and this is Life Matters More, where we explore ESG, sustainability, and the future of business. Welcome to Life Matters More. If you care about what your money is really doing in the world, then today's conversation is going to matter. Most of us have been told a very simple story about investing, that it's about returns, risk, and maybe, if we're lucky, avoiding the worst offenders. But what if that's only a fraction of the picture? What if the real question is what kind of influence does your money have? My guest today, Steve Waters, has built his career around answering that question. Steve is head of impact here at Paradise Norton, where he's helping to reshape what it means to invest responsibly as something far more than a tick-box exercise. Known for pushing beyond the usual ESG conversations, challenging the idea that simply excluding companies from a portfolio is enough, and instead focusing on stewardship, engagement, and using investor influence to drive meaningful change in the company's own. As head of impact, he's responsible for Paradigm Norton becoming one of the highest scoring B Corps in the country and us delivering on our ambition to become a force for good. His work has been recognized with a Sustainable Finance Leader of the Year Award at the Global Good Award, and he's led on our application, our successful application for the King's Award, and he is organizing our hosting of the National Emergency Briefing. But what's interesting about Steve is not just what he's achieved, but it's how he thinks. He brings a rigour to the idea that money can and should be a force for good, and that doing this requires more honesty, curiosity, and more accountability than we might expect. So we're going to explore this a little more. Steve, welcome to Life Matters More.

SPEAKER_00 1:58

Thanks, Philip. It's great to be here with you. I'll maybe get you to say some of them more often when you're introducing me. It's all sound all right, doesn't it? But uh anyway, it's also quite a lot to live up to sometimes, I think. But uh yeah, really good to be here to talk together.

SPEAKER_02 2:12

So most of our listeners may not know what a head of impact does. So do you want to just give us a little rundown of what it is that you're responsible for?

SPEAKER_00 2:21

Okay, yeah. I mean, I say, you know, we sort of made up this job title as the best way we could think of describing it. Um, it is quite a wide-ranging role. Um, and it really came about when we became a B Corp and were thinking about as a company, what you know, what does it mean for us to be a force for good? This definitely isn't just getting um getting the label of being a B Corp and moving on. We're not here for it for that. We're here with a commitment to become a better business. And so um, you know, a short way of saying it is my role is to think about what does it mean for us to be a better business? How can we be a force for good, and then to try to implement that. And so over the years, that's taken me into basically every different bit of the business, to be honest. So it's it's a wide-ranging role. And you know, at times I've got involved in in the operations, in our suppliers, in our governance, in how we look after our team members, um, in how we look after our clients, and um in particular got quite involved in in how we do investing. And I'm a member of our investment committee who I have responsibility for that. Um, so yeah, it's a really interesting, fun role, and uh gives me a bit of uh license to roam around the place asking asking difficult questions and hopefully bringing a few a few insights as well.

SPEAKER_02 3:30

Asking excellent questions. We love it when you ask us questions. But so this wasn't your original background though, was it? And you and as you say, this was a role that was created and you stepped into. So, how did you end up in this head of impact?

SPEAKER_00 3:44

So, if we go right back, I trained as an engineer. Uh, I've always had that kind of brain, a bit of a scientific brain, but I also um have always had quite a strong values basis. And when I was studying engineering, I actually ended up traveling out to East Africa, getting interested in international development, and that led to me um through my twenties doing quite a lot of voluntary work in international international development and with um charities and NGOs. So I spent a couple of years in in Uganda and then uh a year or two in the Middle East as well, in Palestine and Israel. So that whole um uh first part of my career, I suppose, was in the charitable sector. Uh, and I worked for some UK charities as well. Um and I think you know, there's two answers to your question, really. One is there was a bit of happenstance about it that I came across Paradigm Norton, had a relationship with uh with Paradigm Norton already, and um came came across some at a moment where there was a need for me to step into a role. Um and it was that was 2018, so it was at the moment where uh Paradigm had taken the decision, the board had taken the decision to become uh a B Corp and to uh move to employee ownership. But neither of those things had happened yet. Um they were going to be enacted in 2019. And that caught my attention because I thought, wow, isn't that interesting? I wonder what might be possible with such a fundamental shift and sort of rewiring of the DNA of a business where you're um changing the ownership structure and um you know really hard wiring in these values and aspirations of being a B Corp, um, I wonder where that could take us. And so that caught my interest, but it also married up with something I'd been thinking about as I'd been doing other bits of work related to the environment and climate change um through charities and thinking we've got to get business to change and not just business, but actually, you know, if we look at the way the system works, um, finance is so key. It's such an enabler or disabler of things. And so um, can we or how can we get the financial system to change, which is an extremely audacious question and task to try to take on. So, you know, I think for me, joining Paradigm Norton was finding a company with the right kind of values where they had similar aspirations to me to ask some of those big questions and weren't afraid of asking big questions. Um, and I suppose it was me, you know, coming and bringing my teaspoon of positive change to throw into the uh the lake or the ocean of what I thought needed to be done and still needs to be done, actually, within um the financial system and and the wider capitalist system. Um, if we're going to walk the path towards a a future that you and I want to live in and and our children and grandchildren want to live in as well.

SPEAKER_02 6:39

Yeah. So how how hard was it taking a firm? I mean, this is this I've always described Paradigm Norton as quite a brave firm, and I think they were quite brave in, you know, it was what uh B Corp number 128, was it in the UK?

SPEAKER_00 6:54

Something like that. It was, I think it was certainly the first 250. It was it was, you know, not one of the real pioneers who I think were maybe back in 2014, that kind of time, but it was certainly ahead of a curve. And then uh, you know, I one of the very first um financial companies in the UK, I think, to become a B Corp.

SPEAKER_02 7:12

So, how hard was it to take the firm through that B Corp application? Because I know we're going through the recertification again this year, aren't we? And it's slightly different, but but you were responsible for getting the firm through that first application.

SPEAKER_00 7:26

Yeah, so for people who don't know, as a B Corp, you commit to do several things, but the the first is to um to be checked out. So you go through an assessment or a certification process. Um, and that's a bit like an audit in some ways. I mean, I love Jamie Oliver's quote on this. He says it's it's far worse than HMRC getting involved. He said that the B Corp team, when they come to check you out, they really get in your underwear drawer and have a good old route around to see what they can find. So it's it's quite a stretching um process to go through the assessment. And actually, it was um one of my colleagues at Paradigm who was most involved in the first assessment. I was more on the fringes. Um and I I then got involved after that. But it was um it yeah, it's a it's an in-depth um process. They you get asked a lot of questions, um, and you, you know, many companies don't meet up to the standard, frankly. So uh the the in the old system, uh they they've recently made a change, but it you had to get uh a score um which was roughly out of 200, and the average score was about 50, and and 80 was the pass mark to become a B Corp. So, you know, the majority of companies that were trying to take that assessment um weren't able to become a B Corp. So it was a high bar to reach. Um, yeah, and it was um, I think you know, it was stretching for Paradigm. We made some changes in the company um in order to pass the mark and got 85.7 point um points as a score, um, which is very creditable because it is it is tough. Um, but the positive thing um was that Paradigm had always been a very values-based company. Um it was founded to be different uh back in the day, and it had always had real depth of integrity uh and strong values when it came to how business was done. So actually, we you know we were building on a really great foundation there. It was already very diligent about how it looked after its employees, uh, it already um had extremely high integrity and really led the way in terms of looking after clients and really setting a high bar in, frankly, in the profession in the UK for how that was done. Uh, so there was a lot already um to talk about. But I think it would be fair to say that there were probably some areas that hadn't had as much attention. Um, and the most obvious one of those uh was was climate change and the environment and and this agenda of ESG and how you integrate um that into the way you do investments for clients. So that was something back in 2019 that that wasn't front and center for paradigm. And you know, that was when I came and started asking awkward questions, I think. So I I remember uh famously a couple of conversations I had with with two of the board members um back in 2019. Uh so a conversation with with Barry, the chief exec at the time, where I was saying, Barry, we really need to think about responsible investing and ESG. And you know, I think this is the future, I think this is the way paradigm should be going. And um, and you know, that felt a stretch at that time. And I and I could hear in Barry's response, he, you know, he's he was absolutely up for it and could see the validity of of that, and that probably that was the way to be moving. But um, you know, what I remember was that uh all of our expectations about how quickly we might be able to do that, and in order to take our clients and our employees and other people with us, um, you know, the sense was this is gonna, this is a big, big change and this is gonna take a long time. Um and uh, you know, a similar conversation with the um the director of operations who said, Steve, you're giving me a whole new set of problems here to think about. So I think I think that's right. It has been a whole new set of problems, but they're really good problems. Um, and looking back now, I think all of us would think we've made far more change in those few years than we ever imagined we would have done when we were starting.

SPEAKER_02 11:27

So, all right, talk to us about about that change. So I know our our people score is one of the highest in the world. Um, and I don't know how much I don't think we had to make a huge amount of changes around that because our people's our people benefits has always been pretty, pretty high. And I sort of remember coming in last year and seeing that we have a a well-being day a month. And I when I go out to the world and talk to people about that, they sort of look at me aghast. And and initially I was a bit aghast, but um I have to say that is an awesome benefit, and we don't see a reduction in productivity. Actually, we see people working really hard because they know they're being looked after, and and I love that about us. Coming from a legal background where every six minutes counted, um, that that felt quite huge for me joining this firm. And I think is a really valued benefit that people have, in amongst a lot of the other benefits. So we did really well on our people score. Um, and you spoke there about some of the big changes we made, particularly in relation to um the climate and the environment. Can you talk to us a little bit about what we did?

SPEAKER_00 12:37

Yeah. So I mean, just to give an overview for people who aren't familiar with how B Corp think about this, there's broadly five topics that they they scrutinize and look at. So there's governance, there's environment, there's um community, which they would include um suppliers uh in, there's your clients, and then there's your people. And so um, as I said, I mean this really this work has taken me into all different parts of the business. But I think in terms of when we, as you've mentioned, we we re-certified in 2023 and we made real steps forward. We were actually um recognized that year as as having the the biggest improvement out of any UK company. Um so when we recertified, our score jumped up from that 85 to 148, um, so well over 60 points. And yeah, that was the um that year was the biggest improvement. Um, and that led, I think at the at that time that was the the eighth highest score in the UK um out of you know more than a thousand companies, so it's it's now well more than that. Um and we were um yeah, we were uh very high scoring all all around um on any measure, really. And if you looked at those those five different areas, we we were scoring highly in all those, particularly for um our people score. So yeah, that was um one of the highest scores in the world at the time. So I think the story is you know, there wasn't any one change that we made that really um made the big difference. It was about marginal gains, it was about changes in lots of areas. And back um at that time, 2020, 2021, um I was with others, I gathered together a team of people um to help me to drive changes. And each year we would set a plan for well, what do we want to change this year? What do we think we should do? And what I said to people was we're not going to look at the score, let's not focus on that for now. Let's think about the things that we actually think are most impactful and things we we think would make a difference. Let's do those things. And if we do that, I think the score will probably look after itself. And sure enough, when it came to recertifying that, that proved to be the case. So um, so we did that. We we thought, well, what what's important, what makes a difference? I mean, the first point to make would be clearly changing our ownership structure and becoming employee-owned, you know, was a huge change for the business, was um something that, like many EO businesses, um, you know, takes some wrapping your head around and and in terms of um embedding that change after the actual legal bit of it has been done, in terms of then getting people to think like owners and and letting that um filter through into the culture of the business, that took some time. Um, so we there was a lot of focus on that back in 2019, 2020. Um, I was a little bit involved there with the the trustees um who are overseeing the employee ownership trust as as they got to grips with what does it mean to do that role. And uh, you know, and employee ownership is something that B Corp recognizes uh very highly. You know, the ownership is such a significant driver, isn't it, of of the priorities of a business. And there's no doubt that for us, having a different ownership structure has enabled us to think differently and act differently. I think that's the same for other businesses who've gone down that route. And so, and B Corp recognized that. So they do give you, you know, quite significant recognition in the scoring system, being employee owned. So that was a really big change. Um, did boost our score. Then other areas in terms of the environment, we started, we'd we'd never calculated the carbon footprint uh of the operations of the business. Um, so we started trying to estimate that, um, looking at where we spent money, looking at our utilities, looking at um our commuting and our business travel, and really getting a sense of well, what what are the the most impactful things here? What are the um things we're doing that have the biggest impact? And then how can we change those? So we started changing energy suppliers and monitoring how we used our energy and um thinking about how we did our travel, um, and actually looking at where we spent money as well. So many emissions are locked up in what's called scope three emissions as a result of spending money in the operations of your business. So that was um that was a big starting point. But then the obvious question for us was well, uh, okay, we've got an estimate of our carbon emissions for running our business, but what do we do? Well, we advise clients and we advise them about their investments. And so this is, you know, a really big thing. This is this is the core of what we do. And the emissions, carbon emissions associated with our advice and those investments, if we try to estimate what those are, and I remember doing a back of an envelope conversation uh calculation of that, it was clear that they just absolutely dwarfed the emissions of our day-to-day operations and running an office and running a business. By far the most significant thing we do is is the advice we give about um money and investments. So that was the start then um, you know, of that conversation of okay, what does this mean? And how do we how do we factor in climate, but also social responsibility into the way that we do investing? So that was, I'll talk maybe more in a second about that because it's a it's a big journey in itself, but but that um was and is very significant and probably remains the single biggest change that we've made and the thing that um has been recognized by B Corp and by some of the other awards we've we've had as well.

SPEAKER_02 18:15

Yeah, so this year, hugely proud, we won the King's Award for Sustainable Development, and you won the Global Good Award, Sustainable Leader of the Year. What went into that? Why did you win it? Talk to us about the the the work that you've done there, which probably a good segue into what you were sort of alluding to there in relation to our portfolios.

SPEAKER_00 18:41

Yeah. Yeah, I mean, I think it's wonderful, isn't it, to have the recognition of those awards and pretty humbling actually when um when I think about some of the other um people and organizations who who were nominated for some of those awards. There were some really impressive people at the Global Good Awards ceremony and and I'm sure as well with the Kings Awards. So so we're really proud of that. And and still, you know, there's a bit of a pinch-me thing about it sometimes thinking, really, do we really deserve these things? But um, yeah, very proud. I think I think both of those, it really was the story of the change that we've made over probably the last five or so years. Um and central to that has been um the way that we've changed doing investments for clients and doing doing investing. So I got very involved in our investment committee. Um, I don't know exactly when, but it might have been somewhere around 2021. Um and we responsible investing was something we would have done for clients if they'd asked us in the past, but it wasn't something where Paradigm had an off-the-shelf option for clients to choose it. And probably it wasn't something where we'd really gone out to all of our clients and asked them for their preferences and said, Well, what do you want? What do you care about? And so that was the starting point was to was to provide a really credible option that would stand up against um how how we'd invested in the past and would stay true to all of our uh beliefs and and our investment philosophy. We didn't want to deviate from that, we didn't want to compromise. I mean, these are people's um hard-earned savings and it's their retirement we're talking about. So, so it absolutely had to be something that would work financially for people, but we didn't think there was any reason that you couldn't do well in terms of financial returns and also try to be responsible in the way you did that. And that's what we set about looking at and challenging ourselves to to solve. So we um designed a uh an investment portfolio that we called our responsible portfolio, PNR. And the mandate of that was to was to try and match the same returns that we had from traditional investing, but to do it in a more responsible way. So, what does that mean? That meant um both uh using EST funds that would exclude the worst offenders, the companies that we would all feel pretty uncomfortable investing in, um, but then to be uh active investors. What I mean by active investors, I mean um to use stewardship and engagement, to use our voice as people who are you know our clients ultimately shareholders and beneficiaries of the profits of companies that are listed on global stock markets. And so with that comes the right to have a voice and to try and influence them. And but we don't do that directly, we do that through the fund managers, the asset managers who invest money on our behalf. So we started taking a really hard look at um those asset managers and what they were doing to hold these companies to account, how they were voting at ATMs, what questions they were asking management and what they what they were prioritizing in in those conversations. And um and then building portfolio where we had a belief that actually um the money of our clients was um it was going to be looked after well, but it was gonna when people vote. Or ask questions of management, we really felt they were going to be representing our values and views and those of our clients and asking the kind of questions that we might expect them to ask. So we built that portfolio and then we went out and started speaking to clients. We told them that we got this new option and we started asking questions about what they cared about, how they wanted to invest and whether they felt this was appropriate. And so the big story is that we we put real focus on that. We actually set ourselves some targets. So, you know, the main target was we want to talk to all of our clients about this and find out what they care about and what their views are and what their preferences are. But we also have an aspiration that this becomes really significant part of how we do things. Obviously, it's clients' choices in the end. We, you know, we're just advising. But to our mind, we felt actually we don't think there's any real compromise with this. We think this is going to perform just as well. We don't see any reason over the long term that this should underperform or overperform compared to traditional investing. And if you can do that and be responsible, you know, why wouldn't you? And particularly as for us as a B Corp company, you've said we want to be a force for good, why wouldn't we do that? Um, and that led to us taking the decision to make this responsible portfolio our default for new clients who came to us. Just thinking we we don't really want to offer another option if we can offer this and we think it's it's just as good for clients, and actually is being responsible as well. So that's what we started doing.

SPEAKER_02 23:27

When you when when you went out to our clients and said, look, we've got this, uh, do you care? What was their response?

SPEAKER_00 23:37

Yeah, I mean, you to be honest, you know, I'm not an advisor, so I was I wasn't having those conversations, I was hearing the feedback from my colleagues who were. So you might be better asking them. But I think I think it'd be fair to say, you know, obviously a real range of reactions. I think for some people, um, great, this is what I was waiting for. You know, it wasn't a big decision at all because it just chimed with with how they felt and what they wanted to do. Um, I think for some, it, you know, they might pretty quickly felt that just wasn't for them. But then quite a lot of clients, well, it was a conversation. It was some education. They wanted to ask those questions about well, can you explain a bit more about how this works? What does it mean in practice? How is it going to perform? Am I still going to be okay in terms of my retirement or my financial needs? Um, and so we we needed to do that work in order to have that conversation with people. But what we found was um that, you know, sure enough, true to what some of the national surveys would suggest, that the vast majority of people want to do some good when they do investing. And there's uh the national survey from the FCA suggests around 80% of people would say that. Um, and that's largely been borne out in in what we found. So when we were able to say to clients, look, we don't, we really don't think there has to be a compromise here with doing this, we've found over the last four or five years that more than the vast majority now of clients have chosen that. So we're we're to the up to the point where more than 60%, close, close to 65% of our clients, I think now, um, have chosen to invest in that way. That's become the primary thing that we do. It's it's our default portfolio. And um, and so that's a great change. And I think it shows that it shows the truth in the fact that people are willing to do that if there's a credible option.

SPEAKER_02 25:30

Yeah, I'm super proud of what you've done there and what the team's done. I it I think is an incredible achievement. But as you say, you and I often talk about are we really making a difference? Is this having an impact? What more can we do whilst keeping our clients safe? So I know you have uh you've got a really rigorous framework for assessing our fund managers because the whole point of stewardship and engagement is that we're asking hard questions and that we're driving as much change as we possibly can through that avenue. So talk to us about your um your assessment, what are you looking for? Uh, what are you pleased with, what are you not pleased with?

SPEAKER_00 26:12

Yeah, okay. So I mentioned that we, you know, the key thing we think is is questioning what are asset managers doing to represent the views of our clients? And are they doing the things that we would hope and expect? So we, as you say, um developed a framework for for trying to set out well, what do we think good practice would would look like? What are we looking for from these asset managers? Um, and we probably need a whole podcast to go through that and have a conversation. But if I try to just quickly skim through some of it, there's first of all, just looking at how how they run their business and how how much resource they're putting into this. Um, have they got um people are employing who are experts in in this area in ESG, in stewardship and engagement? What's the expertise and qualifications of of the team of people who do that? And how does that team fit in with the rest of the company and particularly with um the investment teams who are making decisions about which investments to choose? We'd also um look at the characteristics of a fund. So all funds are different, they have um different criteria for how they choose which companies to invest in. And so uh and ESG funds or responsible funds would have um some ways of filtering out the bad guys, or in some cases uh leaning in towards um that some of those companies that are seen to be to be leaders, perhaps those that have got lower carbon emissions um or those who in other ways are sort of leading the way. And so we wanted to understand well, what what's the methodology that the fund managers are using to do that? Um, as I said, at the same time for us, sticking quite close to to our investment philosophy, which is we do broad market investing, you've got to talk yourself out of investing in in the broad market. And so we weren't looking for um for this portfolio for funds that were very narrow and only just invested in a few companies, in the real leaders, we were still look willing to invest in a wide range of companies. And why was that? Well, that's partly because we need to take everyone on this transition. You know, you and I could choose to not invest in um the worst companies, or maybe not invest in the vast majority of companies, just invest in the really good ones. But the question we have to ask is well, if you did that and I did that, and if the whole UK population did that, would anything change? And um, our conclusion when we looked at the academic research was there's no compelling case to show that um excluding companies from investment portfolios is going to result in positive change. It's marginal, really, as to whether that's affecting the cost of capital for those companies. Um, there's really not clear compelling evidence to show that that's going to deliver change. So that's what led us towards the evidence that actually there's a case to be made for continuing to invest in the majority of companies because we need them to transition. And if we can invest in them and have a say and use our influence, then um we can raise the chances, hopefully, of that happening. One of my colleagues, um, David, uses the analogy of a of a football team playing home or away, you know. And if you're if you're playing at home and you've got the whole crowd or most of the crowd in the stadium cheering you on, you the you know, the evidence is you're you're more likely to score goals, you're more likely to win. And so the analogy here would be if we can get to the point where the majority of investors are calling for positive change, or at the very least, are patient long-term investors who aren't just demanding short-term returns, but are willing to be patient and um encourage companies to make choices that are the right things long-term. Because frankly, you know, most of this stuff, climate change, social issues, sooner or later, they probably will get priced in. They still will start to affect profits and business and share prices if they aren't doing at the moment. Um, so actually, let's get the majority of the investment crowd cheering on for positive change, then you raise the chances of getting the positive change that we need. And we need to take the majority of companies with us. Some companies probably, frankly, need to go out of business and die. And we don't really need them to be doing what they do anymore because it's not going to help us to get where we need to go. But the majority of people and companies we need to take with us and we need to go through this change together.

SPEAKER_02 30:45

Yeah, I mean, it's important to say, I don't think any of us are saying that this is you know the most impactful way of getting change, but actually it is certainly more impactful than not asking for the change.

SPEAKER_00 31:02

Yeah, I mean, the the phrase I use is you know, I'm still the jury is really out for me about um how effective this can be. Um I I mean it's great hearing some other guests talk. We had Amelia speaking on the podcast from LNG, and it's you know really good to hear them talking about the way they use stewardship, and you can see there the positive work that's being done and the change that is happening. So there's really good stuff going on. I think the the question for me is when you come to an issue like climate change where it's really urgent, the question is can we get the scale of change that we need and can we get it as quick as we need it? And that's what you'd have to say, the jury's very much out. And I mean, my view would be stewardship and engagement, holding these companies to account as investors is the best lever available to us as investors, but it's not the only thing we can do. And we we definitely I don't think it's going to work on its own. I think most people would say, you know, we need policy change as well, we need other actors as well. So uh it's the right thing to do, it's the right thing to start with. And we've, you know, we've done a lot on it, but we are sort of careful to not try to say, look, this is a panacea, this is going to fix everything, this is suddenly the world's gonna be sustainable. That's not what we're promising. We're saying this is the responsible and right thing to do, it's a starting point. And you know, as you well know, Philippa, from our conversations, we then keep on saying, well, what else can we do on top of that? But this is a basic. Um, and as I said, we I mean, there's a lot more to the the checking that we do of asset managers. You know, we do a big research exercise every year now to um to go back and take a look at how they've improved, how they're innovating and what they do. Um, we do spot checking of how they voted uh a different company's AGMs to see if their you know their votes are lining up with what they say. We we ask them for data about how you know how many conversations they've had with companies, and we we get anecdotal um case studies as well of the kinds of conversations and interventions that they've tried to make with companies. Um, and we we now share some of these stories with our clients as well to try to bring to life like this is what we think is going on through investing in in this fund in this uh way, um, as opposed to investing in a in a traditional portfolio where where there wouldn't be that activity going on.

SPEAKER_02 33:29

Do you know every I think every single podcast that I've done, um what is surprising uh me in terms of the power of humans to do something in a world where we are all just individuals is the power of asking good questions, the power of asking, what is it that you've done, the power of asking, you know, what more can you do? Um show us, demonstrate to us how you are trying. Um, and I just think the more of us who ask good questions, the the more impact we'll have or more results we'll see. So outside of the portfolio type conversation, um, so obviously we have our responsible portfolio and we also have our intentional portfolio. Um uh do you want to spend a couple of minutes just talking about the journey to to getting the the sort of higher conviction portfolio up and running, and then we'll move on to the the sort of things that we're looking at doing at the moment, which sit outside of that uh pure investment side.

SPEAKER_00 34:34

Yeah, sure. Yeah, so we we recognize that um for for some people they they want to go further, they're happy um actually to take perhaps a little bit more risk or accept a little bit um more volatility, a little bit more up and down in in their investments, um, or possibly, uh we don't know, but possibly to uh accept if if an investment didn't perform quite as well. Um, but they're willing to do that if they can really see that um they're investing um in companies that they feel are um in line with what what they want to see in the world. And so we had to think about what we could do um and offer there. And um we designed the PNI portfolio. And so what's that about? Well, it's saying this is a this is to invest in a smaller group of companies, and it is those who are leaders, it is those who are aligned with the UN sustainable development goals, which is a really robust framework of measures. Um and what does that mean? Well, it means uh succinctly that those companies are are seen to be doing something that is taking us where we need to go, something that is helping humanity solve the problems and the issues that we have and and transition through to a more sustainable future. So um we uh looked for a good partner to work with us with us on that. And we ended up partnering with Tribe Impact Capital, who we're really um pleased to be working with. Um, and we were impressed with their depth of knowledge, and and we we we did that because we wanted to do this really well, and we felt it was going to be a stretch for us to credibly deliver something um without getting some external expertise to come and help us. And so we wanted to bring in some external expertise. We used data providers through Tribe to um to look at, well, how aligned are these companies to the UN SDGs? What what product or service is it that they have that is seen to have is seen to be doing some good, is seen to be aligned with this measure of um sustainable development. And can it be quantified? And how much of their revenue is that? Is that a big part of what they do or a small part? And all of that data is then used to to arrive at um at a graph and a percentage to say, well, this is this is a set of companies here that are really well aligned with um with where we want to go. So that's what we've offered. Um it's it's proven, you know, it's not for everyone, but it's it's a really great option for people who um who want to go a little bit further, who um perhaps you know might not feel totally at ease with with still investing their money in that really broad range of companies. They want to give a signal and say, look, I'm putting my money where I believe and putting my money towards where I want the future to go. So we've we're really pleased to have seen um clients investing in that way, or for some clients just dipping their toe in and putting a small proportion of their portfolio into PNI and keeping the remainder or the majority in uh our responsible portfolio.

SPEAKER_02 37:45

Um and we have lots of excellent uh feedback and stories, don't we, from uh from our fund managers about what those companies are doing, which is which is really exciting and a great way to chat to our clients about how their money is doing some some good in the world, hopefully.

SPEAKER_00 38:02

Yeah. I mean, so a key difference is we we produce a quite a lengthy impact report specifically for our PNI portfolio to give some of the data, but but then to tell the stories um as well. And uh yeah, that's um this you know it's great to see, isn't it? That there's there's some really good stuff uh going on out there.

SPEAKER_02 38:21

Um and outside of that sort of investment side of things, we've got uh a we're hosting the national emergency briefing in a few weeks. Uh, you brought that to us. Um, and so I'd love you to tell the audience what it is, why we're doing it, and and who we're gonna have there.

SPEAKER_00 38:43

Okay. So this is um this is again something focused on on primarily on climate change. Or I think it'd be fair to say that it goes a lot further than that because as we know, climate is gonna affect all of us in many ways, um, and it's very interconnected to social issues as well. But the national emergency briefing um is was an event that took place in November last year, uh just down the road from the Houses of Parliament. And it came out of a concern, really, that um the public weren't aware enough and politicians weren't aware enough of what the climate scientists are saying and of how significant it is and of how it might affect all of our lives much sooner than most people think and in more profound ways. And so it was an attempt to bring the scientists to parliament to brief politicians, uh, really to say, why aren't you talking about this more? Why isn't this absolutely central to the policy agenda? So let's lay out the truth as it is, let's listen to the scientists, and then let's think about how we act on it and do that together. So there's a a series of talks that took place, which are available online as videos. And um and now the the team behind the initiative have published a one-hour film. It's got Chris Packham, who we all might all remember from Nature Programs when we were younger. Um, and it's a it's a shortened version of the key points from some of those talks, but also some discussion with members of the public watching that and and reflecting on it. It's quite an impactful film. I went to watch it, and you know, it I think I know these issues, and it still really affected me because it brings home the scale of change, the scale of risk, um, the impacts that could have on us as individuals and our families and our descendants. Um, but the positive thing about it is it's great to bring people together. And so what we're planning to do is host a screening in Bristol. We're willing to maybe host others in London and Exeter as well for some of our other clients. Um, but we're we're bringing together um our clients, but also others, uh, particularly those in the business community or the local civic community, to say, well, let's have a conversation about this. Let's watch the film, let's hear from the experts. We we need to see this stuff. You know, we can't just bury our heads in the sand. But also, actually, I think if we if we watch it together and talk about it together, we can then all feel more of a sense of agency of, okay, but what can I do? What can we do together? I mean, don't get me wrong, these problems won't be solved on our own. We do need policy action. We, you know, we need everyone to step up here. But I think it's just the starting point is for us to talk together at that. So we're yeah, we're hosting a space to bring, particularly the sort of Bristol business community and clients of businesses in Bristol together to watch the film, reflect on it. We've got a panel, really great panel of people to um uh to discuss it and we'll have questions from the audience as well. We'll have a drink together because we'll probably need one, frankly, after seeing the film. Um, and uh, and that may then lead on to further conversation. So we're sort of open-minded about where it goes from there. Um, we uh uh, as I said to you, I you know, continuing to ask this question of well, what does it mean for us to be a force for good? We'll do the basics in terms of um how we do our business and how how we advise clients, but then what else can we do as well? And so this is one experiment, if you like, to try something out um and hopefully to build a community as well. Because we we really think there's people who care about this. We know a lot of them already, but we'd love to know more and we'd love to have conversations and as you said, ask ask those hard questions and be willing to sit with those hard questions. I think it's so easy to come across a hard question, feel discomfort and want to move on. And so, what would it look like for us to sit with that discomfort and see what could emerge out of a conversation around that?

SPEAKER_02 42:44

Yeah. Well, we're gonna be doing more of these podcasts together, Steve. So maybe we'll do one after the beginning of July and report back to the audience about how that went, the discussions that we had and the opportunities that we identified with the other people from the business community to, you know, to be the grown-ups in the room and and to to actually take some steps together and work collaboratively to try and do our part in being a force for good in the world. Thank you so much, Steve. Uh as you know, I love working with you. I love our conversations. Everyone enjoyed chatting with you today. To our audience, I hope you enjoyed it and learned a little bit uh about what it is that we do and how we are trying to be a force for good in the world. As always, if you know someone else who might be interested, please do let them know about it. Uh, like and subscribe, and keep asking those excellent questions.

SPEAKER_01 43:38

Until next time. This podcast is intended to be of a general nature, will not be suitable for everyone, and should not be treated as a specific recommendation. We recommend taking professional advice before entering into any obligation or transaction. PNR portfolios adopt a diversified, cost-efficient approach aimed at maximising risk-adjusted returns. As a secondary consideration, the portfolios prioritize selecting fund managers who effectively engage with underlying companies on environmental, social, and governance ESG matters. Most underlying funds also incorporate ESG factors and exclusions into the fund construction. PNR portfolios are not designed to achieve specific sustainability outcomes and should not be viewed as sustainable investments. PNI portfolios take a more targeted sustainability approach, seeking closer alignment with defined environmental and or social outcomes, and which are predominantly defined by UN Sustainable Development Goals, SDGs. Definitions of ethical investing vary, and incorporating ESG or sustainability factors does not guarantee positive outcomes or investment performance. The value of investments can fall as well as rise, and you may get back less than you originally invested. The suitability of any investment will depend on your individual circumstances. Paradigm Norton Financial Planning Limited is authorised and regulated by the Financial Conduct Authority.