A leader with over twenty years of experience in sustainability in corporate and investment management in Asia, Europe, and North America shares her views on the evolution of this space, trends, and thoughts on the future. 

Hyewon Kong Career Highlights

• Vice President, Head of Responsible Investing, ESG Strategy Lead at Investment Management Corporation of Ontario (IMCO)
• One of Canada’s 2020 Clean50 leaders for creating broad collaborations to drive a sustainability agenda in the Canadian financial industry
• Co-Founder and co-Chair of the Canadian Responsible Investment Working Group
• Member of the Board of Directors for the University of British Columbia’s Investment Management Trust
• Lecturer in environmental finance and sustainable & impact investment
• Member of CFA Society Toronto

What drew you to the sustainability field?

I would say the “aha” moment of my career came when I did my master’s degree in environmental policy at Oxford University. Professor Gordon Clark—an expert in pensions and sustainability—was my supervisor, and he helped open my eyes to the new concept (back then) of the “triple bottom line” and how sustainability can meet profitability. Once I learned that sustainability could create long-term value for business, there was no turning back, and sustainable investing has been a vocation for me ever since. I have led environmental, social, and governance (ESG) integration and managed sustainable and impact investing portfolios for several pension plans, endowments, and foundations around the world; my main goal is to demonstrate that sustainable investments can create both financial returns and positive environmental and social outcomes.

Having been in sustainability for more than twenty years, what has surprised you the most about its evolution?

As a practitioner in the field who has been advocating to increase awareness of ESG for nearly two decades, the current interest and engagement on ESG truly feels like a “50-year overnight sensation.” It feels like we have reached an inflection point in sustainability where ESG is no longer a “nice to have” but has become a “must have,” and the pace of change has accelerated! We are currently witnessing an explosion of net-zero emissions commitments from more than 100 countries and 2,100 companies and financial institutions. We’re also seeing a tsunami of sustainable finance policies and regulations around the world, including the European Union (EU) package of regulations on sustainable finance and increasingly mandatory requirements for climate reporting.       

What do you think are the biggest (real or perceived) obstacles investment managers have in integrating ESG in their investment process? How would you respond?

One of the biggest challenges to integrating ESG in the investment process has been the lack of consistent, comparable, and standardized data to support informed investment decision making. The good news is that we are finally seeing some momentum for global efforts to address this issue in ESG data by setting global standards to measure sustainability, such as the Task Force on Climate-related Financial Disclosures’ (TCFD) framework for climate-related information and the Sustainable Accounting Standard Board’s (SASB) standards for material sustainability information. In particular, the International Financial Reporting Standards Foundation’s creation of an International Sustainability Standards Board to set sustainability reporting requirements will be a game changer in ESG standards, similar to the critical role that the creation of the International Accounting Standards Board played in setting financial accounting standards two decades ago.   

What do you see as the next big ESG issue that the finance industry should help tackle?

Biodiversity. Biodiversity loss has been named one of the top five most impactful and most likely risks for the next decade by the World Economic Forum’s Global Risks Reports for the last three years, but we are still in the very early stages of understanding complex biodiversity risks. A new global financial reporting standard to measure corporate impacts on nature and biodiversity, the Taskforce on Nature-related Financial Disclosures, was launched at the recent G7 summit and will build on the work of the TCFD, which has become the de facto standard on climate risks and opportunities.   

How can the finance industry coordinate to make a greater impact in advancing ESG issues?

When it comes to sustainability, collaboration is such an important part of advancing ESG issues. A number of investor networks and initiatives on ESG (such as Principles for Responsible Investment [PRI], Responsible Investment Association [RIA], Canadian Coalition for Good Governance [CCGG], and Climate Action 100+) have been supporting investors in working with peers to influence markets and engage with companies and industries to drive good ESG practices. Another powerful way that investors can make a greater impact is through proxy voting. ESG issues yet again dominated this year’s proxy season, and we just witnessed record high levels of support for ESG and climate-related proposals from a majority of shareholders of General Electric, DuPont, Berkshire Hathaway, and many U.S. oil majors; we also saw an ExxonMobil board shakeup for failing to have oversight of the company’s climate risks.

Has the COVID-19 pandemic hurt the sustainability movement?

I would say it’s the opposite. During the pandemic, demand to invest in sustainable investment funds hit a record high. Global green bond issuance also reached a record high of US$269.5 billion in 2020 and is expected to reach a new high this year. The COVID-19 crisis exposed the vulnerability of our society and strengthened the urgency and strategic case to address environmental and social issues, so the pandemic accelerated our focus on sustainability!

Looking into the crystal ball: Kong’s view on three key industry trends that will shape the future of ESG investing:

1. Paris-aligned investment: With the largest financial institutions backing the transition to net-zero emissions, climate investing will be the next big thing. Climate transition and decarbonization, in alignment with a net-zero emissions future and the goals of the Paris Agreement, will be incorporated into various investment strategies. 
2. “Double materiality”: The concept of “double materiality” is something we need to watch carefully. First introduced by the EU’s Non-Financial Reporting Directive, the “double materiality” principle expands the conventional understanding of what accounting standards consider “material.” As such, companies are expected to address not only “material” risks to companies, but also the impacts of companies on society and the environment.
3. Active Ownership 2.0: We are seeing the evolution of investor stewardship that goes beyond engagement with individual companies on material ESG issues and that addresses positive impacts of investment, systemic sustainability issues, and enhanced collaboration.

You co-founded an RIA Working Group. Why are initiatives like this so important for the future of sustainability?

The Canadian Responsible Investment Working Group that I co-founded and co-chair enables collaboration, sharing of best practices, and learning from others working in responsible investment. As a core element of Active Ownership 2.0, collaboration among investors is a powerful tool to drive positive impact and a sustainability agenda.

What would you say have been the driving forces behind your very accomplished career?

I feel incredibly lucky to do what I love and love what I do every day. Working toward making a positive impact makes me feel happy and purposeful, and I feel like my passion and enthusiasm can be contagious and help motivate the people I work with, leading to better outcomes. 

How did the CFA designation benefit your career?

Without the CFA designation, I would not be where I am now. I was promoted to portfolio manager after passing the CFA exams while I was still in the UK, then was headhunted to Canada seven years ago through a global search for a portfolio manager with the CFA designation who managed sustainable investing mandates.    

What advice would you give to someone looking to move into sustainability?

I get contacted by many investment practitioners who want to move into sustainability, and I tell them to get involved in internal ESG initiatives first, which is so much easier now that ESG has become a core part of most investment strategies and lines of business. Second, enroll in a master’s program or courses, or take ESG-related certificates like the CFA Institute’s Certificate in ESG Investing and SASB’s Fundamentals of Sustainability Accounting Credential. Many students I taught in sustainable investing courses have now joined our industry. Third, attend industry conferences or seminars on ESG and sustainability, which can help with learning the latest ESG practices and networking.  

Fun facts

What is the first thing you’re looking forward to getting back to once the pandemic is over?
Hugging people! Also, I began my current job virtually, so I am looking forward to meeting my colleagues in person.

Did you acquire any interesting hobbies during the pandemic?
I have been enjoying playing the music of my favourite composer/pianist, Ludovico Einaudi, on the piano. Einaudi’s music was featured in various movies I watched and podcasts I listened to during the pandemic, so playing his music on my piano made it feel doubly special.  

What is your motto/motivational mantra?
Carpe diem and live life to the fullest! Make the most of what I am given and appreciate every second of what life offers us. 

What are you reading right now?
A novel by a contemporary Chinese writer, Yu Hua, titled Chronicle of a Blood Merchant.