More than two dozen asset owners and their representatives have put their name to a statement spelling out how they expect asset management firms to behave regarding climate risk.
Co-authored by the responsible investment and stewardship leads at the People’s Partnership, Brunel Pension Partnership and Scottish Widows, the statement was borne of discussions organised by UK asset owners about asset managers’ engagement and proxy voting on climate matters and their misalignment with asset owner interests.
Although the statement does indicate that asset managers could lose the signatories’ business if they do not meet expectations, the organisers said the statement is intended to respond to asset managers’ requests for clarity from asset owners and empower them.
“Time is running out in the lead of up to 2030,” said Leanne Clements, head of responsible investment for The People’s Pension and lead of the initiative.
“Asset owners and asset managers must work together in partnership to drive meaningful change: not only in the companies in which we invest, but in the underlying economic, social and environmental systems upon which our members depend.”
Vaishnavi Ravishankar, head of stewardship at Brunel PP, said the statement was an important signal to the market.
“We expect this to be a living document that will evolve through ongoing dialogues with our managers but in the first instance, codifies what we consider as best practice to inform manager selection and monitoring,” she said.
Principles-based expectations
According to the statement, asset managers will be expected to carry out public policy engagement as a core element of their climate stewardship proposition across asset classes and prioritise collaborative initiatives.
The expectation regarding collaborative initiatives is prefaced with “where possible”, presumably in a nod to the hostile political environment surrounding sustainable investing in the US and the effect this has had on US firms’ membership of Climate Action 100+ and the Net Zero Asset Managers initiative.
According to the asset owners’ statement, their managers should have a commitment to align their climate engagement activities with the goals of the Paris Agreement and publicly state firm-wide climate ambitions and commitments.
Asset managers should also have a framework for prioritising engagement with companies and sectors and this “should be rooted in a robust theory of change that delivers maximum impact”.
With respect to individual companies, for example, this would mean focussing engagements on the robustness of corporate net zero commitments rather than purely on disclosure of climate risks and opportunities.
Asset managers should also properly resource their stewardship function, including headcount, blend of expertise and enterprise capabilities such as data access, underpinned by investment in IT infrastructure.
Shipra Gupta, investment stewardship lead at Scottish Widows, said: “This statement sets out a clear principles-based framework of asset owner expectations of their asset managers encompassing the importance of influencing and shaping policy and regulation, of working in collaboration with stakeholders, of using their shareholder rights and responsibilities more effectively, and all of it being embedded in appropriate sectoral strategies and relevant technical expertise.”
At the time of publication the statement had primarily been signed by UK asset owners, but garnering further support is ongoing and it has also attracted international support (Australian Ethical Investment and Pensionskasse Basel-Stadt, for example).
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