By Toby Belsom, Head of Investor Research and Analytics, ShareAction

Benchmarking is rarely without controversy. The spotlight is always on the results, their (mis)interpretation and double guessing the agenda. In its various guises, ShareAction has undertaken benchmarking on responsible investment in the asset management industry for over 10 years. We were recently involved in a collaborative piece of research with other organisations that survey the investment industry on their responsible investment performance. The aim was to take a step back to review some of the lessons learned and to identify a few generic steps to improve the process for all the participants. We felt it was worth highlighting and sharing some of the results. We are also interested in further feedback.

Each of the contributors to VBDO’s report (ShareAction, the Responsible Investment Association Australasia, and the Italian Forum per la Finanza Sostenibile) outlined their approach to benchmarking, analysing the lessons learned in relation to responsible investment benchmarking. There were both similarities and differences in the survey approaches, the reaction of participants, and the perceived benefits.

Interestingly, all the surveys have adopted a co-operative theory of change and tried to avoid naming and shaming. The broad objective of each surveyor was to help institutional investors and ’local’ capital market participants improve and develop their approach to responsible investment. Despite a similar core of questions around governance, policy, implementation and accountability, there were differences across the surveys in terms of approach and topic areas. Often these seemed to be driven by different local regulatory frameworks and market maturity. For instance, the Italian FFS decided to wait until the Italian SRI market ‘matured’ before releasing individual organisational scores thereby publishing a survey rather than a benchmark. Likewise, the Australian survey only listed the top performing funds rather than the laggards. In line with the collaborative approach, the surveyors were often nervous about reporting a full set of results for fear of stifling an immature market.

ShareAction has been undertaking benchmarking on responsible investment in the asset management industry for over 10 years

Response rates from the survey participants were relatively consistent across the surveys that had a ‘track record’ – with more than 70% of organisations filling out the survey. The exception being the Australian RIAA survey which is in its first year and yet to build recognition within its local market and so is still more reliant on data published by the organisations surveyed.

The study has highlighted a range of features of delivering a successful benchmark survey:

  • Knowledge – of the local responsible investment market to ensure questions and topics are relevant;
  • Engagement – by a range of stakeholders in relation to the benchmark design, its scoring methodology and follow-up engagement;
  • Verification – a public and fair scoring process with verification of the results;
  • Governance – a governance structure that ensures the surveyor is independent from the survey respondents;
  • Trends – publishing repeated benchmarks ‘editions’ encourages improvement and builds engagement over time.

Post survey engagement has always been a key feature of ShareAction’s asset manager surveys. They are a key part of our theory of change and benchmarking has proved a key tool in promoting better responsible investment practice across the asset ownership chain. As with previous surveys, ShareAction’s experience during the follow-up of the 2017 European Asset Managers Survey raised questions and challenges about how to keep improving the impact of our surveys

  • How can we help asset managers use the survey results and process to improve their own performance?
  • How do we best use the impetus of those that are concerned about their ranking?
  • How can the survey process adapt to different regulatory and market conditions in different regions?

Rankings are a key part of ShareAction’s mission to reform the investment system from within, by driving best practice and encouraging a race to the top.

Several of the managers we met after the report publication wanted to improve their rating, use the framework as a mechanism to leverage change within their organisation, and identify ‘best in class’ among peers. This ranged from some mangers identifying which questions were key in improving their score in the next survey to a more holistic approach on best practice lessons that organisations could learn from others.

Criticisms included, for example, passive fund managers’ comments that the structure of the questions favoured active managers.

Feedback post event also highlighted some structural issues that were not necessarily related to an individual asset manager. In the 2017 survey we incorporated a new section on fee structure and transparency. The feedback on this area highlighted the different national regulatory regimes that produced different responses in this and other areas. For example, the French Article 137 on carbon footprinting meant asset managers under this national regime were further down the road in this regard due to regulatory pressures rather than corporate initiatives.

As ShareAction works to incorporate the AODP index and develop our existing surveys, we are increasingly working across a global and changing industry landscape. We will continue to strive to make our surveys the best possible tool for change. As with everything we do we welcome feedback and advice.

Thanks Toby! To find out more about our research and rankings, click here