Asset managers making investments on behalf of charities are not doing enough to invest responsibly, charity networks say.
In the UK, charities have more than £115bn invested, according to ShareAction’s Charities Responsible Investment Network (CRIN), which, along with the Responsible Investment Network – Universities, includes charities such as the Barrow Cadbury Trust, Esmée Fairbairn Foundation, St Anne’s College Oxford, Polden-Puckham Charitable Foundation, Guy’s and St Thomas’ Charity, and WWF-UK.
These networks conducted research into 37 of their asset managers, and found the majority of the group’s asset managers (54%) are yet to set any investment targets related to climate change, while just 36% make executive pay conditional on performance on responsible investment issues.
Stephen Power SJ, trustee of Jesuits in Britain, called the findings ‘concerning’ and said he wanted to see asset managers improve their carbon footprint accounting with reasonable expectations of Scope 3 emissions – those generated by end users of products and services.
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In 2018, CRIN set out expectations for managers, which included procedures for proxy voting, escalating engagement, demonstrating ESG in holdings, clear governance policies and fee transparency.
Since then, some expectations have led to positive improvement. For example asset managers have made progress on gender diversity, with the average proportion of women on boards rising to 31% in 2020, up from 23% in 2018. This contrasts with ethnic diversity, where the average proportion of directors of colour is 6%, just one percentage point increase since 2018.
“It is promising to see pockets of improvement in the sector – 32% of our sample filed shareholder resolutions during the 2019 season, up from 11% in 2018,” said Isobel Mitchell, senior officer – networks, at ShareAction, and author of the report.
However, she added the sector is not yet moving at the speed demanded by the systemic crises we face.
On asset managers’ voting behaviour, the networks found 59% publish their voting decisions, while less than half (49%) provided rationales for these decisions.
Colin Baines, investment engagement manager at Friends Provident Foundation said: “This really ought to be among the basics of any ESG policy. If asset managers wish to be taken seriously on ESG, they need to adopt a presumption in favour of ESG resolutions, taking a comply or explain approach. You cannot claim to be engaging on ESG issues and then vote against what you are engaging for; it discredits the entire concept.”
Matthias Lomas, engagement manager – investment at Guy’s and St Thomas’ Charity, added: “Given their influence over companies, asset managers have a fantastic opportunity to help build a more equitable and sustainable economy. We therefore encourage all asset managers to publicly disclose their full voting decisions. Greater transparency would help paint a clearer picture of their commitment to positive change.”