The Net Zero Asset Owner Alliance (NZAOA) has launched an AI-assisted framework that will allow asset owners to evaluate and compare the climate stewardship performance of the world’s largest asset managers.
Developed in collaboration with academic research group SDG Labs, the framework draws on publicly available disclosures and will be published in full at the PRI in Person conference in October following a consultation period with asset managers.
The tool has been built to help pension funds and other institutional investors compare asset managers using a consistent framework, improve manager selection and appointment decisions, strengthen ongoing monitoring and stewardship oversight, and reduce duplicated due diligence and reporting requests, the alliance said.
The framework is based on stewardship guidelines developed by the NZAOA, which SDG Labs used to translate into an AI-assisted assessment methodology.
The tool will be made publicly available for all asset owners, rather than being limited to NZAOA members.
Speaking during a webinar yesterday, Patrick Peura, head of investment stewardship and engagement at Allianz IM and engagement lead for the net-zero asset owner group, explained that the framework translates the alliance’s stewardship guidelines into a standardised assessment of the top 100 public equity asset managers.
The assessment is due to be expanded to all PRI public equity signatories and then to fixed income and private markets.
“Each of the guidelines specifically lays out what our needs are, and a lot of them are focused on transparency, so that asset owners could then see the materials published because of that transparency and decide is it the asset manager that best suits us,” said Peura.
“Overall, they’re intended to create a more efficient and effective marketplace for asset owners to select their asset managers.”
Below par
The webinar was also used to share early findings from a pilot assessment using the new framework.
The results suggest no asset manager currently meets the alliance’s highest stewardship standard. The pilot assessed the top 100 public equity asset managers and found that no manager achieved an A rating, while only a handful reached the B range.
There was also a significant drop-off in scores across the lower half of the rankings.
Dawn Turner, former chief executive officer of Brunel Pension Partnership and now a non-executive director at People’s Partnership, said: “There is space for everyone to improve […] the bar for genuinely Paris-aligned stewardship and climate change action is still far above current market practice.”
Turner added that this means there is headroom for improvement across the entire industry to continue to push for higher standards without worrying that they are out of step with global norms.
She noted that the top half of managers’ performance is clustered quite tightly with relatively small differences between first and 50th, but once you drop below 50th, the scores “fall off a cliff”.
Turner said the findings highlighted the need for UK asset owners, particularly larger funds and those pursuing greater collaboration, to strengthen manager selection and retention policies, reward stronger-performing managers, set clear consequences for persistent underperformers, and engage with laggards to improve standards or consider reallocating capital.
