The shortfalls in asset managers’ engagement

Redington finds efforts at the strategy level are not matching up with firm-wide commitments

Asset managers are falling short of delivering on their climate engagement strategies with gaps emerging when firms have been asked to evidence stewardship track records for their funds.

In Redington’s annual Sustainable Investment Survey, which in 2022 encompassed 122 asset managers across a range of geographies, covering 232 strategies and an aggregated £37.7trn in AUM, it was found that 92% of the strategies state they prioritise climate in their engagement efforts.

However, Redington discovered a 34% shortfall with only 54% strategies stating they track and report engagement activities.

See also: – Check out the latest ESG Clarity digital magazine on engagement and stewardship

For the asset managers that do approach, track and report on stewardship at the strategy level, 98% say climate change is a priority in their engagements with investee companies, as they do for other issues such as human rights (87%), biodiversity (80%), pollution and waste (84%) and business ethics (80%).

However, when they show the issues they have actually engaged on over the past 12 months, the numbers fall short in every instance – to 72%, 59%, 40%, 49% and 38%, respectively.

Redington also flagged only 26% of respondents reported having voted on 100% of resolutions – down from 43% in 2021.

“Untapped potential to engage is a notable theme in this year’s findings and a trend from which climate change is, unfortunately, not exempt,” said Anastasia Guha (pictured), head of sustainable investment at Redington.

“While almost every manager we spoke to highlighted climate as a priority in their engagement efforts, many were unable to provide any evidence of engagement on the issue – making genuine progress difficult to track.

“At this stage, managers should be using all the tools at their disposal and exercising voting rights to the fullest extent possible, leveraging their influence to positively impact company management.”

Other findings from the survey included 87% of managers saying they integrate climate into investment processes – a climb up from 80% last year – but at a strategy level 63% actually perform climate risk assessments and only 67% monitor emissions-based metrics.

Meanwhile, 59% of managers have a firm-level net-zero target, but similar targets cover only 34% of their strategies.

Guha noted that translating “rhetoric into reality” is a challenge for the asset management industry but warned they should not be comfortable with “letting firm-level progress mask a lack of action in individual strategies”.

“The gap between statements at firm level and what is delivered within strategies is a trend of particular note in this year’s findings and a distinction that the industry needs to address sooner rather than later.”

Avatar

Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...