A group of UK investment consultants has launched a new tool to help asset owners test whether their investment managers’ stewardship is aligned with their own expectations – and pursue fixes if not.
Launched in 2020, the Investment Consultants Sustainability Working Group (ICSWG) brings together leading UK investment consulting firms with the aim of improving sustainable investment practices across the investment industry.
Mette Charles, sustainability research lead at Aon, said the new investment stewardship alignment tool was designed to bring “greater clarity and structure” to conversations between asset owners and managers by focusing on stewardship “in an applied way”.
The tool’s launch comes as asset owners are under increasing pressure to demonstrate that stewardship is meaningful, well governed and consistent with fiduciary duties, the consultants group noted.
Asset managers. meanwhile, are looking for asset owners to set clearer, and potentially more constructive, realistic, stewardship expectations.
The ICSWG’s tool aims to provide a structured framework, using a flow chart to guide asset owners through an assessment of managers’ proxy voting decisions and engagement activity, and how closely these line up with asset owners’ own responsible investment beliefs and stewardship expectations.
The tool also offers guidance on addressing non-alignment and exploring escalation options, essentially involving further communication and monitoring with timelines, or, if necessary, selecting a different manager.
Stephen Miles, head of sustainable investing at Willis Towers Watson Investments, said the tool could also help asset owners compare managers’ stewardship approaches with other frameworks, including the Principles for Responsible Investment (PRI) pathways, and could complement other industry tools to support stewardship discussions.
Claire Jones, head of responsible investment at LCP, related the tool to a suggestion in the Financial Markets Law Committee’s 2024 paper on fiduciary duties that ‘pension fund trustees will wish to have processes for the proper communication of their stewardship expectations and proper oversight of the investment managers’ work to reassure themselves of its effectiveness in mitigating risks and supporting returns’.
“The ICSWG tool is designed to help trustees with this monitoring process through helping them assess and improve the alignment of their investment managers’ stewardship with their own expectations and beliefs,” she said.
