Report
Point of No Returns 2023 Part II: Stewardship and Governance
With the world facing interconnected ecological and social crises, and scientists warning that climate tipping points are rapidly approaching1, there has never a more urgent time for asset managers to recognise their role in safeguarding the future. Without robust governance and stewardship policies and practices, they risk the assets they manage, the trust of their clients, and the prospects of both people and planet.
The asset managers in our survey collectively hold over $77 trillion in assets2, which equates to vast influence. By pushing for change at the organisations in which they invest, asset managers can have huge real-world impacts. Similarly, robust internal policies can equip asset managers to make fully-informed, accountable decisions on responsible investment.
In this report, we examine the stewardship and governance practices of the world’s 77 largest asset managers, and review their progress since our last benchmarking in our 2020 Point of No Returns report. We found that, despite being better equipped than ever before, asset managers are shying away from bold action.
There was improvement on policies, in both stewardship and governance. Three times as many asset managers now report that their boards have responsibility for the oversight of responsible investment policies. More than 80% now have voting policies in place that concern climate and social issues, although biodiversity still lags behind.
Only a minority of asset managers reported voting policies on biodiversity
However, most improvements related to transparency or general policies. While these are a strong foundation, they must translate into the necessary action. Although the majority of asset managers had escalation steps in their policies for engaging with investees, over half did not include consequences for unsuccessful engagement, such as divestment or a downgrading in internal ratings. Additionally, asset managers often shy away from measures which bring the most attention, including co-filing resolutions and writing public statements. These actions can be the most impactful, and yet they are being under-used.
Private meetings and voting at AGMs were the most common engagement activities, with divestment and filing resolutions less frequently used
Similarly, key steps forward are hampered where they do not apply across the entire asset management firm. For example, only half of the asset managers’ boards receive responsible investment-related training; and fewer than one-third of asset managers reported that ESG-linked incentives apply to all members of their executive board. These figures were higher for investment decision makers, particularly those in Responsible Investment teams.
Only a minority of asset managers set responsible investment-related KPIs for staff outside senior management and the Responsible Investment team
You can find more detail on many of these asset managers’ voting records on shareholder resolutions on environmental and social topics in our 2022 Voting Matters report. You can also find the full benchmarking in our report: Point of No Returns 2023: Part 1.
Authors: Danielle Vrublevskis, Marina Zorila
Contributing Authors: Abhijay Sood, Dr Claudia Gray, Felix Nagrawala, Katie Stewart, Isabelle Monnickendam and Dr Jonathan Middleton
Contact: research.secretariat@shareaction.org
ShareAction does not provide investment advice - read our disclaimer here.
Point of No Returns series
Alongside this report we have done a top level overview of asset manager approaches to environmental and social issues, and a more in-depth look into how they are engaging companies on social issues, health and human rights.
References
1 Armstrong McKay DI et al. (2022) Exceeding 1.5°C global warming could trigger multiple climate tipping points. Science. DOI: 10.1126/science.abn795.
2 This figure is sourced from the 2021 IPE report, based on data from December 2020. This was accurate as at the time of analysis of this report. According to the 2022 IPE report, the current figure is at least $83 trillion, not taking into account inflation throughout 2022.