Stewardship is an important part of the investment process. Tell us about your recent stewardship successes with asset managers?
Our stewardship work is conducted through a rigorous process whereby third-party fund managers are reviewed on their securities purchases, their own stewardship efforts and by a detailed questionnaire covering seven sustainability areas, such as biodiversity, climate and human rights.
From these exercises, we’re able to compare our results by region, fund manager or sustainability issue. The results show areas of excellence around certain issues such as climate change, but also reveal where the understanding around the integration of biodiversity or human rights into investment processes is still lacking.
During 2022, given the polarisation around sustainability and ESG issues, we engaged with many of our managers on their corporate sponsorships. While we were reassured by the information provided by the majority of our managers, it also allowed us to identify those who hadn’t mapped out their corporate spending or were supporting causes that didn’t align with their own sustainability mandate.
This prompted us to undertake a larger engagement stream on the incongruency of lobby spending, including asking companies and fund managers to publish political expenditure reports, including nominal spending amounts and linking these donations back to mission statements and internal values.
See also: Seaweed: The unsung climate hero
What actions would you like to see asset managers take in the next steps of transition to net zero?
While 70% of our fund managers have set public net-zero targets, many are still not clear on how they will achieve these reductions in their portfolios. We would like to see our managers set out clear actions for investee companies in line with credible sectoral decarbonisation pathways, and clear escalation plans where these actions are not met. To date, our managers’ voting track records are mixed, with some not yet translating unsatisfactory engagement outcomes into votes.
Read the full Q&A in ESG Clarity’s March 2023 digital magazine.