New ShareAction research highlights current leading practices on E, S and G issues to guide asset owners’ engagements with managers.

(Monday 01 March, London) Responsible investment advocates have typically assessed ESG practices against theoretically ideal standards and found asset managers falling short. For asset owners, however, these assessments have proved of limited value in spurring progress from their managers, as the latter frequently argue that those standards are unrealistic.

These discussions are about to become more challenging for managers, as responsible investment NGO ShareAction has released new research outlining the current state of real-life leading practice by asset managers on core ESG topics.

Asset owners are welcoming the move, with Colin Baines of Friends Provident Foundation saying it will “enable asset owners to better hold managers to account by demonstrating that positive changes are not just possible but have already been implemented by their peers.”

The topics addressed by ShareAction are:

  • Responsible investment governance
  • Climate change
  • Human and labour rights
  • Biodiversity

Each chapter includes a checklist of current leading practices that asset owners can compare with their managers’ practices, as well as case studies of specific managers’ implementation of these ideas.

On decarbonisation targets, for example, ShareAction note the recent proliferation of net-zero commitments, but Bank J. Safra Sarasin is highlighted as an industry leader in this area, having made a pledge to reach a carbon-neutral outcome in all assets under management by 2035. Similarly, on biodiversity, ACTIAM is praised for committing to a portfolio-wide target of no net biodiversity loss by 2030.

However, as with most topics covered in the report, no single manager implements all aspects of leading practice. ShareAction summarise leading practices on decarbonisation as:

  • Committing to net-zero emissions across all assets under management by 2050 at the latest
  • Setting interim targets for emissions reductions for 2030 at the latest
  • Taking into account scope 1, 2, and, where material, scope 3 portfolio emissions
  • Being consistent with emissions pathways identified in the IPCC special report on global warming of 1.5°C

Proxy voting is identified as another key test of investors’ commitment to environmental and social goals, with ShareAction stating that, “Proxy voting policies form the backbone of an effective stewardship approach.” They highlight several pockets of promising developments in this area.

For example, Aviva Investors will vote against directors of CA100+ companies yet to set a science-based target; RBC Global Asset Management will generally support proposals asking companies to abstain from operating in or using materials extracted from environmentally sensitive areas; while NN Investment Partners will vote against directors at companies at risk of violating the United Nations Global Compact.

But ShareAction also highlight industry resistance on this topic, with many asset managers withholding support for ESG resolutions on the basis that they were engaging privately with the companies in question. Isobel Mitchell, report co-author, said:

“This is flawed reasoning. Engaging without voting is ‘tea and biscuits’ engagement, providing little incentive for investee companies to change. Asset managers must back up private engagement by voting for ESG resolutions to avoid sending mixed messages.”

Overall ShareAction argue that the body of evidence showed promising examples of progress by some asset managers. In particular, the fund managers most frequently cited throughout the leading practice guide were BNP Paribas Asset Management, NN Investment Partners, AXA Investment Managers, Robeco, and Legal & General Investment Management.

But the NGO emphasised that no single asset manager came close to implementing leading practices across all four topics.  Ms Mitchell said, “Current leading practice is still a world away from what is needed of the sector to meet the challenges presented by the systemic risks considered in this report.” For this reason, the guide includes a series of suggested ‘next steps’ for the sector, such as voting policies that commit to supporting all independent ESG resolutions on a ‘comply or explain’ basis.

Luba Nikulina, Global Head of Research at Willis Towers Watson, said:

“As a key link between asset managers and their asset owner clients, we welcome this leading practice guide that not only evidences what good looks like on responsible investment by asset managers, but outlines clear suggestions for where the sector needs to head next. The checklist is a helpful practical resource for not only benchmarking performance, but framing important discussions with asset managers.”

Colin Baines, Investment Engagement Manager at Friends Provident Foundation, said:

“We welcome the publication of this leading practice guide, which will enable asset owners to better hold managers to account by demonstrating that positive changes are not just possible but have already been implemented by their peers. The guide reinforces the key messages in our own sector assessment, especially around stewardship and voting and the need for stronger commitments across both. We encourage asset owners to use the checklist to set strong expectations for their asset managers on authentic responsible investment.”

Notes to editors

For all enquiries and interview requests, please contact:
Conor Quinn, Media Communications Manager, ShareAction
conor.quinn@shareaction.org   +44 (0)7444 696 214

Methodology

The findings and examples featured in this report were collected from two main sources:

  • Data from ShareAction’s 2020 Point of No Returns survey of the largest 75 global asset managers (collected in the second half of 2019),
  • Publications made by the top 20 highest scoring asset managers up to February 2021.

About ShareAction

ShareAction is a research and campaigning organisation pushing the global investment system to take responsibility for its impacts on people and planet, and to use its power to create a green, fair, and healthy society.

We want a future where all finance powers social progress. For 15 years ShareAction has driven responsibility into the heart of mainstream investment through research, campaigning, policy advocacy and public mobilisation. Using our tools and expertise, we influence major investors and the companies they invest in to improve labour standards, tackle the climate crisis and address inequality and public health issues.