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A Word with Mary-Therese Barton

Posted 17 June 2024 in EMpower News   |   Share

Recently, EMpower’s President & CEO Cynthia Steele spoke with Mary-Therese Barton, Equity Partner & Chief Investment Officer-Fixed Income at Pictet and member of our UK Board of Directors. They talked about ESG, building human capital in the next generation, and more. 

I am still struck by what an unusual and forward-thinking choice Pictet made a few years back to partner with EMpower, knowing that doubling down on the “S” in “ESG” was something that you really wanted to do to learn more about on the ground social issues in emerging market countries. Are there things that have surprised you or that you've learned along the way?

All successful relationships are a two-way street with communication and shared experiences at the core. The value has been getting to know better the organisations, which offer us that lens on local issues, and the programme managers on the ground. 

We are also learning a great deal about EMpower's theory of change and how you select those countries and organisations. How you are measuring your impact is also guiding our own conversations around a forward-looking approach, within investment, and discussions with clients about investing in emerging markets. So, of course, it was a huge benefit in getting to know the partners on the ground and understanding the issues that can help shape topics for our meetings with government officials and businesses. EMpower has truly brought us that 360 lens on an emerging country. The positive surprise has been understanding the capital within EMpower, your theory of change, and ultimately how that's very much aligned with what we're doing as investors in these countries. 

One of the initial dreams that you had was that by Pictet taking on this sort of first leader role, you might be able to galvanise other asset managers and others to follow suit. Could you talk a little about this vision? 

Yes, there is significant scope for other asset managers to collaborate in this approach. It's not as if the information we're receiving is tradable and investment market-sensitive. It's about taking the longer-term view. And it's about how we, as a community of investors—who have a fiduciary duty to our clients and performance, but also have a consideration about the stewardship of the asset class—can work together. To ensure that we are a) supporting an organisation that is doing such valuable work, and b) upskilling the industry. I often use this term at work. Talent attracts talent, and the more we can learn from exchanging with peers, that's slowly going to be changing the dialogue of how the industry could move from just thinking about ESG as a risk concept—what not to invest in—to what can we invest in. What is our theory of change as investors, which is about thinking about the future, and thinking about the best investment opportunities? 

Quite often that is through really understanding the power and the energy for change from a very grassroots level within a country. We meet with many interesting organisations. I'm thinking of the amazing organisation UMRio we met with in Brazil. We understand it's a competitive landscape. There are many different collaborative platforms for ESG, responsible investment, alliances, and engagement. This is something that was built by the community initially to be thinking about how we can give back. It's a squaring of a circle, in the sense that we can then move forward together to think about the next stage of how investment evolves in emerging market fixed income. 

You are one of the people that I have found most articulate in talking about human capital. I'm interested to hear more about how you see EMpower as an engine for developing human capital, especially among young people in the next generation in emerging market countries. 

Quite rightly, considering the science and the degree of significant climate events we've experienced in recent years, the focus has been on the environment. But particularly in terms of thinking about the environmental aspects of lower-income countries, we often felt the language and the tools were inadequate. We were missing a huge part of the picture of thinking about future development by only focusing on the E. And going back to our own old economic textbooks, human capital by itself is a real significant engine of economic growth, and that's taking examples like Singapore, Taiwan, and South Korea. A lot of the progress we've seen in these countries is because of human capital. 

Human capital and strong governance are going to play such key roles in fostering the outcomes. What we've often struggled with is seeing the correlation between ESG scores and the wealth of the country, which means if you were just taking a very simple approach to ESG and saying the worst-scored ESG countries will be excluded, or you look to minimise investment, this means you're excluding capital, potentially from countries that need it the most. 

When we started to think about which countries are supporting human capital, which we have identified as an engine of growth, what’s been key for us is looking at life expectancy, nutrition, education, access to healthcare, improving literacy rates, infrastructure, and even financial inclusion. If we can identify and understand the links of these to longer-term economic outcomes, and define which countries are committed to these policies, that gives us a very long-term indicator of the future performance of countries and stronger GDP. But it is also indicating very strong governance by these countries and the degree of change that is required. 

So, a lot of people say the “S” is difficult to measure. But again, that's starting to change as well, and we're starting to see new frameworks starting to be developed. Over the next decade, there's going to be much more focus in this area—in particular, from an emerging market, lower-income perspective. 

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