UN Principles of Responsible Investment has been delivering report cards to asset managers rating their responsible investment practices for the past year.
Investment manager signatories report annually on their responsible investment activities using the organisation’s reporting framework, and then receive an assessment report showing how these activities and progress have been rated. The reports, and the summary scorecards which go alongside them, can be shared if the asset manager chooses to do so.
ESG Clarity looked at the publicly available scorecards shared by investment managers.
CCLA scored five out of five stars for 75% of the modules it reported on, namely Direct – Listed equity – Other, Policy, Governance and Strategy, and Confidence Building Measures, which was a new module in 2023. It excelled peers most for Direct – Listed Equity – Other with a percentage score of 98% while the median received around 50%.
WHEB Asset Management also scored top marks on Policy, Governance and Strategy and Confidence Building Measures. Both firms had a single four-star score, CCLA for Direct – Real Estate and WHEB for Direct – Listed Equity – Active Fundamental.
Seb Beloe, WHEB partner – head of research, said: “The PRI questionnaire is a huge amount of work – even for a boutique management business like us with a small number of strategies. It is obviously gratifying to get high scores and we are obviously pleased when we get 100%!”
He noted there was a bit of ambiguity around some of the modules. “Some of the areas where we were scored down are sometimes to do with interpretation and I think we are typically quite conservative and err on the side of caution if a question seems a bit ambiguous,” said Beloe.
Receiving fives stars on 50% of the 14 modules it was scored on, abrdn shone brightest in areas of Direct – Infrastructure, Direct – Fixed Income – Corporate, and Direct – Listed Equity – Active Fundamental, among others. It gained two three-star scores with rest falling into the four-star rating. PRI awarded the highest percentage score to the group for Direct – Fixed Income – SSA, with 98%.
It was four stars across the board for Downing with its 85% for Policy Governance and Strategy being the score that set it apart most from peers. The group reported on five modules in total.
Roger Lewis, Downing’s head of responsible investment, said the firm genuinely integrates ESG into all investments using a hybrid approach of external data and proprietary analysis for material factors.
“We are active owners with dialogue all the time about the sustainability risk and opportunity that our investees face.
“And we hold ourselves to account and invite stakeholders to form their own conclusions by publicly reporting progress and outcomes – UNPRI is one way (UK Stewardship Code and an annual stewardship and responsible investment report are others). We were pleased to have external recognition of this approach in our scores.”
JP Morgan Asset Management
JPMAM got the full five stars for Direct – Infrastructure with 95%. In terms of responsible activities the fund group got fours in 12 other modules with its only three-star score for Direct- Listed Equity – Passive Equity. It was above the median for all modules apart from Confidence Building Measures where it was on par.
The boutique asset manager, which has been a signatory since PRI was founded in 2011, secured five stars for half of the four modules it reported on, namely Direct – Listed Equity – Active Quantitative, with 94%, and Direct – Listed Equity – Active Fundamental, with 91%.
Suresh Mistry, Alquity head of sustainability, commented: “It’s great to see the development of the reporting framework over the years incorporate deeper and broader aspects of responsible investment, enabling specialists like us to be able to showcase our capability and experience.”
He added, however, the reporting can be accused of “marking your own homework” as there is no audit of the information. “But we believe in completing it as thoroughly as possible and in the spirit it was intended rather than to just ‘tick boxes’ to get a high score. Some sections of the reporting – especially in strategy and governance and confidence-building measures are geared towards large companies with deeper resources but it does help us understand where we need to add to when able.”
Osmosis was close to full marks across all four of the modules it reported on for 2023, comfortably outperforming peers. It scored fives stars, and 100%, for Confidence Building Measures, while Policy, Governance and Strategy, Direct – Listed Equity – Active Quantitative and Direct – Hedge Funds – Long/Short Equity all also earned five stars from PRI.
Lennart Hermans, Osmosis head of environmental research, said: “Osmosis is delighted to have achieved five-star scores across all sectors of the PRI’s latest assessment. As a relatively small firm with a dedicated focus on the environment and responsible investment, we hold the PRI principles in high regard.”
Hermans noted PRI made changes to reporting requirements last year. It endeavoured to make terminology clearer, questions less ambiguous, indictors more relevant to respondents and remove scoring methods that penalised firms for not being able to adopt certain practices.
“More importantly, we hope that the new assessment will do more to identify those financial institutions that are not acting in the best interests of the environment (e.g. financing new coal plants) or whose internal practices are lagging from a social and governance perspective. Industry bodies like the PRI have the potential to have real teeth simply by the stroke of a pen – let’s see if 2023 was the year for them to use it,” said Hermans.
Private markets investment firm Stafford Capital, a PRI signatory since 2010, came in level with CCLA and WHEB with five stars on three out of four assessed modules – Policy, Governance and Strategy, Indirect – Private Equity, and Indirect – Infrastructure. It earned four out of five on the Confidence Building Measures module.
Marta Jankovic, head of sustainability at Stafford Capital, commented: “We recognise our responsibility as an investor to contribute to a more sustainable financial system. We take a long-term responsible investment approach across our investment strategies and apply the principles of the PRI to everything that we do.
“Achieving high scores in the 2023 UN PRI assessment is a direct reflection of Stafford’s commitment to best practices, robust governance structures and continued improvement. As we accept this validation proudly, we remain steadfast in our commitment to advancing sustainability practices by pushing boundaries and setting higher standards for operations.”
The investment manager scored five stars and over 90% across all six modules PRI assessed. EQ Investors secured marks highest above those of its peers in Indirect – Listed Equity – Passive, and Indirect – Fixed Income – Passive.
Louisiana Salge, EQ head of sustainability, said: “We are extremely proud to have scored so highly. Investing sustainably continues to be central to our investment strategy, culture, and ethos.
“This rating demonstrates our industry-leading approach to creating long-term value for clients through the management of portfolios with strong, clear social and environmental outcomes, without compromising financial returns.”