Investors must not retreat from ESG engagement despite political headwinds and regulatory uncertainty, a panel of experts has warned the investment industry this week.
Speaking at a CCLA Investment Management event this week in London, on making responsible investment more engaging, a panel of industry leaders stressed that collaborative stewardship remains the most effective way to influence corporate behaviour and mitigate systemic risks.
The panel discussion focused on the importance of engagement and stewardship in responsible investment and the challenges it faces.
Speaking to the audience, Lindsey Stewart, director of stewardship and policy at Morningstar Sustainalytics, said: “All of this [ESG engagement and stewardship] wouldn’t be under attack if it wasn’t important. It [engagement] does get results.”
Hostile pressure
Speaking alongside Stewart was Yulia Bull, head of UK and Ireland at the Principles for Responsible Investment (PRI), Sufina Ahmad, director of the John Ellerman Foundation, and ShareAction chief executive officer Catherine Howarth.
In her keynote speech at the CCLA event, Howarth said the attack on investor rights was not accidental, adding that it was being slowed down somewhat deliberately.
“There is a deliberate slowing down of climate engagement by incumbent industries,” said Howarth.
“There is a deliberate slowing down of climate engagement by incumbent industries”
Catherine Howarth, CEO of ShareAction
“We’ve entered what I have been calling a stewardship recession. The recession we’re in didn’t come out of nowhere. It’s been triggered very intentionally by a blizzard of intense and very hostile pressure from highly interventionist, elected officials in the United States and in my view, it is an incredibly inappropriate thing that has been going on,” she added.
Stressing the strength of collaborative action, Bull said: “Collaborative stewardship helps amplify investor action and influence corporate performance, thereby making it scalable.”
Bull’s comments come after a recent PRI analysis of this year’s voting season which revealed that shareholder-rights resolutions in the US came to the fore this year, emerging as the most commonly filed topic, with resolutions filed receiving an average of 41.9% as investors try to adapt to the increasingly challenging US regulatory and political environments.
Echoing Bull’s view on collaboration, Ahmad said: “The idea that we could make a difference on our own is lovely, but we feel that we can go further and faster if we’re in a community and in dialogue with others.”
Looking at this year’s proxy season, Morningstar’s Stewart said the number of proxy voting proposals with near-zero support continues to increase, making the quality of engagement more critical than ever.
Speaking to IPE earlier this year on emerging proxy season trends, Stewart said the trend towards lower average support for shareholder resolutions, particularly for environmental and social proposals, showed no sign of reversing.
“It [engagement] has become very critical amid this fog that’s emerging in the market,” he added.
Looking ahead, Stewart said: “The pendulum swings backwards and forwards and investment approaches will have to adapt.”
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