AMs ‘Say-Do’ Gap on Stewardship Must End – Redington
The consultancy firm’s upcoming Sustainable Investment Survey reveals a lack of data capture to demonstrate successful stewardship.
The gap between what asset managers say they are doing on stewardship and what they can actually show “can’t persist”, according to Paul Lee, Head of Stewardship and Sustainability at investment consultancy Redington.
Redington is set to release its fourth annual Sustainable Investment (SI) Survey, covering 127 managers with an aggregate £39 trillion (US$29 trillion) under management.
The survey will reveal that hiring by asset managers has plummeted over the past year, with 34% of managers surveyed adding to their specialist stewardship teams over the last 12 months, compared to a figure of almost 80% the previous year.
The data will also reveal that 45% of asset managers have no staff at all dedicated to stewardship and engagement.
Across all investment strategies, only 38% of survey respondents provided statistical data on specific stewardship activities, even in cases where the strategy states it is ‘engaging for change’ as part of its stewardship approach, the level of statistical evidence rises to just 51%.
Further, 30% of asset managers are unable to evidence ESG views driving specific changes in investment portfolios.
“Engagement is all about change,” Lee told ESG Investor. “It’s not just about having a conversation that shares information – It’s about delivery of change.
“That means identifying that change at the start and measuring whether that change has been delivered.”
He continued that in conversation with asset managers it was found they weren’t collecting data to prove or measure change.
“They’re still very fixed on lots of actions and activities,” he said, noting that managers that are reporting on lots of actions “is still an incredibly high number”.
“Given that engagement is defined as ‘purposeful dialogue with a specific and targeted objective to achieve change’, the number of firms capturing data on this is deeply concerning,” he said.
“There are now a number of cost-effective tools enabling managers to capture this data, and so we really hope to see this figure increase by this time next year.”
Undervalued, under-resourced
Focus on stewardship functions has increased this year, with the UN-convened Principles for Responsible Investment (PRI) leading a project on stewardship resourcing.
The project stems partly from the widely held perception that stewardship is currently undervalued and under-resourced, a situation which potentially undermines its effectiveness in achieving effective oversight of assets.
Lee agreed that the stewardship function suffers from a lack of resources. He noted that in the survey one asset manager reported no fewer than 13,000 individual stewardship actions – nearly 500 actions per member of its stewardship function. Further, seven asset managers’ reported even higher workloads, with as many as 1,000 actions per member of staff.
In related news, a survey by ESG data platform Aqtion of over 650 institutional investors from 31 countries, found 55 of the top 65 institutional investors have a stewardship team as either a standalone decision-maker or joint arbiter with a portfolio or fund manager.
Further, 53 of the top 65 investors publish stewardship reports, which not only shed light onto their position on certain topics but also what they may be focusing on in their engagement with portfolio companies.
Aside from stewardship reports, 25 of the top 65 investors publicly disclose their vote rationales.
Two of the Big Three asset managers, Vanguard and BlackRock, also publish detailed insights on their voting positions in certain high-profile situations, the research noted.
“These insights are published likely to control the narrative in the media as to how they steward their assets, but also serve as a guide as to their position on certain topics to other portfolio companies that may be faced with a similar issue,” Aqtion said in a statement.
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