SSGA launches opt-in sustainability stewardship service

State Street Global Advisors (SSGA), the asset management arm of State Street, which currently manages €4.1trn in assets, has announced the launch of an opt-in sustainability-focused stewardship service for institutional separately managed account clients.

It said the service was designed for and based on input from investors “who prioritise achieving sustainability outcomes” and would provide a framework for company engagement and specialised proxy voting focused on specific sustainability priorities.

Clients opting into the service have the option of using SSGA’s proxy voting and engagement policy or can retain their own voting authority.

A sustainability stewardship service team, which will be led by Hannah Shoesmith, has been created to oversee the execution of the sustainability policy and conduct engagements on behalf of clients.

Shoesmith was previously head of engagement at Schroders, and before that at EOS at Federated Hermes. EOS is a well-established stewardship provider, but operates as a third-party platform rather than being confined to Federated Hermes’ own client base.

SSGA’s new service comes as large US asset managers in particular have to navigate a US political climate that is hostile to sustainability-related investing while also attempting to remain attractive to European clients committed to driving sustainability progress.

SSGA was one of a group of US asset managers to exit Climate Action 100+ last year. It has recently lost business from The People’s Pension and AkademikerPension, at least in part due in connection with sustainability.

‘Creative response’ to pressures

“In light of the organisation’s broad range of clients from across the globe, SSGA continues the firm’s commitment to deliver both rigour and choice in enabling clients to achieve their objectives,” the asset manager said about its new service.

It has opted for European and UK fund ranges sponsored and managed by SSGA into the service, using the default proxy voting and engagement policy.

Karen Wong, global head of sustainable investing and asset stewardship at SSGA, said: “Our new Sustainability Stewardship Service is a clear example of how we continue to innovate to support clients on their unique investment journeys.

“In the ever-evolving sustainability landscape, investors need informed solutions to help them invest with confidence on behalf of their clients and members. The Sustainability Stewardship Service was developed in partnership with clients and will evolve through ongoing client input and research.”

Commenting anonymously, an asset manager consultant said SSGA’s new service was a “creative response” to the pressures currently facing large asset managers, including escalating political scrutiny and legal uncertainty, and that it appeared designed to offer a tailored solution to clients who actively seek sustainability integration.

“That said, the framing of stewardship as a client opt-in service raises important concerns,” the adviser continued. “Much like similar moves by BlackRock and others around ‘client choice’ in proxy voting, it risks suggesting that stewardship is somehow discretionary or optional for asset managers. That would be a fundamental misunderstanding of the role.

“There is also the practical consideration that many clients, including institutional asset owners, rely on their managers’ expertise precisely because they lack the expertise and capacity to track the day-to-day stewardship decisions themselves.”

Read the digital edition of IPE’s latest magazine