French investors have launched a framework to help asset owners assess their managers’ shareholder engagement efforts.
The Valuation Of Influence in Corporate Engagement (VOICE) project is backed by French pension funds ERAFP and Fonds de réserve pour les retraites (FRR), and insurer Malakoff Humanis.
Coordinated by the French Sustainable Investment Forum, its working group also includes experts from BNP Paribas, Candriam, CDC Croissance, Generali, Sycomore and MAIF. It’s supported by the Principles for Responsible Investment and several academics.
“Engagement is the final frontier of standardisation when it comes to sustainability,” said Sophie Haas, FRR’s head of responsible investment, who co-chaired the initiative’s working group.
VOICE “will help asset owners articulate their expectations of asset managers,” she continued, adding: “If we all ask the same questions, it will make things like RFPs and reporting easier for our managers.”
The framework starts by creating a standardised definition of engagement.
“We’re defining engagement as a request for change, accompanied by a clear justification, and a request for a response from the company,” explained François Humbert, engagement lead manager at Generali Investments.
“We’re defining engagement as a request for change, accompanied by a clear justification, and a request for a response from the company”
François Humbert, Generali Investments
“There are other dialogues investors might have with companies, but they don’t qualify as engagement under this framework.”
Next, it creates three scales against which each engagement should be measured, in order to establish its value. These include how ambitious the underlying request is, how active a participant the investor is, and how much change is ultimately achieved.
“There’s been so much emphasis on the quantity of engagement, but we want a bit more focus on the quality,” said Haas. “We want to be able to assess asset managers on that.”
She said that, by distinguishing between investors that take a hands-on approach to engagement, and those that take credit for the achievements of big stewardship initiatives in which they play a minimal role, it will also tackle “the free-rider problem”.
VOICE also provides a shared way of reporting this information to asset owners.
FRR will use it as the basis for questions about the quality of managers’ engagement.
Humbert told IPE that the other asset owners involved “each have a significant number of asset managers, and they’re inviting them to gradually integrate the VOICE method into their engagement management and monitoring tools”.
The ultimate goal is for VOICE to become an international de facto standard for measuring, assessing and communicating engagement efforts.
Representatives from the UK’s People Partnership, Phoenix, Amundi, Boston Common, Robeco, Schroders and Federated Hermes were also interviewed as part of the project.
Haas said: “With the pushback on stewardship in certain regions, we felt it was time for European asset owners to double down on how much we value stewardship teams and good engagement in a resource-constrained environment.”
