Asset owners are sending “weak and fragmented” signals on responsible investment that undermine its integration in the investment chain and progress towards a sustainable financial system, according to a report from the UN-backed Principles for Responsible Investment (PRI).
It said that, although many asset owners have made commitments to responsible investment, most do not implement them effectively.
Also, there are inconsistencies in investment practices, while responsible investment commitments are not embedded in investment mandates.
Weak implementation of responsible investment sends signals that it “is not a priority for asset owners”, said the PRI.
The latter is how the German occupational pension fund association, aba, recently described the situation concerning responsible investment and ESG in Germany, albeit more as a description of a state of play than a judgement.
This reverberates negatively, it added, by limiting the willingness of investment managers and consultants to focus on responsible investment and ESG issues and also affecting the relationship between investors and policymakers.
Many of the latter, it said, are sceptical about asset owners’ commitment to responsible investment.
The report sets out five barriers to a more proactive approach to responsible investment by asset owners, one of which is “the perception that ESG issues do not add value to investment decision-making”.
The solutions flagged by the PRI are for asset owners to build their own internal evidence base and share experiences with their peers.
It said asset owners should publish investment beliefs and integrate sustainability factors in the selection and monitoring process for asset consultants, other advisers and investment managers and other advisers.
In other news, the US Securities and Exchange Commission (SEC) has reportedly declined a request from ExxonMobil not to hold a vote on a climate-change shareholder resolution backed by institutional investors.
Exxon had written to the SEC to ask permission to drop the resolution from its proxy voting materials for the 2016 annual general meeting.
In its response, the SEC said that it disagreed with Exxon’s view that the shareholder resolution was “so inherently vague or indefinite” as to be problematic or that Exxon already provided disclosures that “compare favourably” with the guidelines of the resolution.
The Church Commissioners for England, which runs the Church of England’s £6.7bn (€8.7bn) endowment fund, was one of the investors that urged the SEC to deny Exxon’s request.
Edward Mason, head of responsible investment for the Church Commissioners, said: “We are delighted that shareholders will have the opportunity to confirm that they would like ongoing assurance from ExxonMobil that the company is positioning itself for the transition to a low carbon economy.”
Ceres, a US-based sustainability advocacy group, hailed the SEC ruling as “a huge victory for investors seeking more robust carbon disclosure from US energy companies”.
“The decision paves the way for an unprecedented collaboration between European and US investors to build strong support for a common-sense approach to planning for the energy transition that is underway,” it added.
The SEC also denied a request from Chevron block a similar shareholder resolution, according to Ceres.
Meanwhile in France, ERAFP, the €23.5bn additional pension fund for civil servants, has tweaked its shareholder voting policy by making its position on female board membership more demanding.
It raised its minimum requirement to 35% from 30% of women on boards.
Its 2016 engagement strategy and voting policies will otherwise focus on the same areas as in 2015, such as fighting climate change and aggressive tax optimisation practices.