Glass Lewis Speeds Up Stewardship Shift
Esgaia acquisition looks to deepen data expertise as investors seek greater voting and engagement support.
Proxy voting services provider Glass Lewis intends to heighten its focus on stewardship, evolving its offering in Europe to meet escalating client demand for engagement and voting support.
Earlier this month, Glass Lewis acquired technology platform Esgaia, which focuses on institutional-level investment stewardship data and workflows. The move accelerates Glass Lewis’ plan to serve clients in markets such as Europe and Australia, where the combination of informed proxy voting and issuer engagement is essential in investors’ stewardship efforts.
“What’s become increasingly clear to us is for our clients, especially our European clients, stewardship is becoming an increasingly integral part of their investment process and there’s an increased focus on stewardship,” Bob Mann, CEO at Glass Lewis, told ESG Investor. “Our focus is to become the stewardship provider of choice and really increase our operations in Europe.
“As an organisation, we’re most interested in becoming a supporter of stewardship services, whereas historically we could’ve positioned as primarily a proxy voting agency,” he added. “Our clients are looking for a more holistic offering and support that’s more grounded in the broader notion of stewardship.”
Founded in 2003, Glass Lewis serves more than 1,300 investment managers and pension funds across 100 global markets with a collective AUM of US$40 trillion.
Large index providers have made extensive investments in stewardship in response to rapidly growing demand in most of the world. The increased volume of stewardship activity has also led to many asset managers either buying or building their own technologies to improve the efficiency with which they interact with investee companies.
Research by the Thinking Ahead Institute of 49 asset managers and 20 asset owners published last year – with total assets under management of US$16 trillion – found that for both asset managers and asset owners, stewardship resources accounted for 7% of total investment resources. Engagement represented the largest proportion of their stewardship resourcing.
Acquisition ambitions
Founded in 2021, Esgaia helps institutional investors track, manage, and report on their issuer engagement and investment stewardship programmes. This includes addressing data and workflow inefficiencies, as well as adapting to evolving global standards.
Glass Lewis says that acquiring the company provides the missing piece in its solution, now offering a “full end-to-end stewardship solution”, including programme design, engagement and reporting.
Prior to the acquisition, Glass Lewis and Esgaia had a three-year strategic partnership to provide access to the latter’s data management platform.
“What became evident is that our clients really desired for things to be more integrated than what we could do as two partners,” said Mann. “We thought that bringing them under one umbrella could be a significant add on to the value proposition.”
Glass Lewis’ mid-term objective is to leverage the acquisition of Esgaia to integrate the firm’s corporate governance research, proxy voting and issuer engagement data into a single platform.
In the short term, Glass Lewis’ goal is to bring the content together so that reporting can be done under one platform.
“I think we’re [now] uniquely positioned in the market to offer a comprehensive service for stewardship,” said Mann. “From our engagement with existing clients and possible new clients, we’re getting strong reinforcement of the value proposition that we thought was there”.
He added that the acquisition is part of a “larger and longer-term objective of being able to support our clients in Europe in a more comprehensive way”.
Mann said going forward Glass Lewis will look to enhance its capabilities and enrich its product offerings. “A coherent product offering that allows a client to execute on the use cases that they have is important,” he added. “ESG data and non-financial data isn’t coherent enough.”
Mann joined the proxy provider last April from global ESG data, research and ratings provider Morningstar Sustainalytics. He served as president and chief operating officer at Sustainalytics from March 2008 until its sale to Morningstar in 2020, where he then became president of the newly formed Morningstar Sustainalytics business unit.
Mann said his experience at Sustainalytics will help support the improved “coherence and consistency” of data for Glass Lewis’ clients.
Stewardship schism
A divide between the US and Europe, as well as other markets such as Australia and Canada, has become increasingly apparent. To the frustration of investors, many of the largest US managers failed to back ESG-linked shareholder proposals in the 2024 proxy season – a trend that may well continue during the 2025 season.
Last month, ShareAction’s annual Voting Matters report showcased the continued divergence between European and US managers. Thirteen US-based asset managers scaled down their shareholder resolution support to 19% in 2024 from 25% in 2023, while European managers increased their backing to 82%, up from to 68%.
“The US market is the most differentiated, and I think it’s the most difficult market in which clients can broaden their stewardship activities at the moment,” said Mann.
“For a long stretch of time there was a general convergence on how investors, including pension funds, approached investing and definitions of fiduciary duty,” he added. “Two or three years ago, it became very really evident that there’s a divergence of opinions on what should be considered in an investment decision, what’s considered fiduciary duty and how pension funds and their institutional asset managers should behave in different markets. I think that divergence is clear and it’s accelerating.”
Mann described the pace at which the US is moving away from extra financial information as part of investment decisions as “significant”.
“Products and services for European clients have considerations and needs that are increasingly difficult to provide within the US context. This creates the need for a differentiated product and market strategy,” said Mann.
“We’re really paying attention to happens over the next four or six months in the US and how the operating environment will enforce or require changes in voting recommendations,” he added. “How many more types of issues like diversity, equity and inclusion are going to be brought to the forefront and create real decision making around recommendations?”
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