GERMANY - Union Investment is responding to a "sea change" in environmental, social and governance (ESG) investment by launching a new engagement service.
Michael Schmidt, head of equity fund management, told IPE the German Versorgungswerk BVK's recent signing of the UN's Principles for Responsible Investment (UNPRI) was a "landmark decision" that would "trigger a sea change".
Union said it had seen another trigger for change in its discussions with companies listed on the German stock exchange that have adopted ESG principles in their corporate governance.
"Many of them start to notice they have not adopted similar principles in their own investments such as their pension funds," Schmidt said. "I expect more DAX companies or other German investors to sign the UNPRI or make similar commitments within a year."
He added that ESG was now a total-portfolio concern for institutional investors, similar to risk management, rather than being limited to single investments or asset classes.
Union is therefore planning to offer engagement services for its institutional Spezialfonds clients, including proxy voting.
Whereas investment companies are legally obliged to vote on behalf of their mutual fund clients, this is not the case with Spezialfonds clients.
For a fee, Spezialfonds investors will have the opportunity to give a proxy to Union to vote at shareholders' meetings.
This also means that Union, as shareholder representative, will get greater voting power.
"We cast votes at almost every company we are invested in all over the world, and we have published our voting criteria," Schmidt said.
He added that companies were now much more willing to hold talks with investors or investor representatives.
"When we started to engage with companies more intensively some two years ago, they were sceptical," Schmidt said. "Now, they welcome the dialogue."