Fund Solutions

Asset Managers Take ‘the B Road’ to ESG Credibility

Australia’s First Sentier extends list of managers redefining their purpose through membership of the B Corp community.  

At a time when their green credentials are under scrutiny, a growing number of asset managers are turning to B Corporation (B Corp) accreditation to demonstrate their commitment to sustainability.  

Sydney-headquartered global asset manager First Sentier Investors became B Corp-certified last week, joining an expanding list of firms in the asset management space and elsewhere in the finance sector.  

More than 500 finance sector firms have achieved B Corp status, finding common purpose with a global community now in excess of 5,600. Investment advisors, a group which includes asset managers, is the biggest sub-group with 163 members, followed by firms engaged in equity investing, totalling 133. 

Investment advisors dominated the 2022 list of ‘Best for the World’ B Corps in terms of service to customers. The 40-plus firms included Mirova, Trillium, WHEB and EQ Investors. B Lab Global also lists top performers annually for environment, social, governance, community and workers.  

Rebecca Antonini, First Sentier Investors’ Head of Corporate Sustainability, told ESG Investor that the firm was motivated to achieve B Corp certification by a desire to act in the best interests of all stakeholders, while delivering services informed by responsible investment principles. “It is globally recognised and rigorously measures our business against the high standards we aspire to. It also provides a framework to ensure ongoing improvement in future years,” she said. B Corps must undergo recertification every three years.  

Antonini said the A$209 billion (US$138 billion) AUM manager had been looking for ways to measure its wider impact for a number of years. “We recognise that if we wish to be seen as credible leaders in responsible investing, we need to hold our own business to the same standards of corporate behaviour and practices that we expect of the companies we invest our clients’ capital in,” she said.  

Mutual benefits 

B Corps are required to act in “ways that benefit society as a whole”, pursuing “social and environmental good”, and not “just profits”. Non-profit B Lab, founded in 2006, bestows certification on companies which meet its high standards of social and environmental performance, accountability and transparency.  

According to B Lab, certification helps firms to further their social mission, while scaling their business, providing them with access to cost-effective paths to sustainability and boosting their appeal to employees, as well as building credibility and trust among stakeholders. 

“We get many benefits – talent retention, counterparty engagement, investor interaction – and we are keen to encourage other fund managers and real estate companies to consider becoming B Corps too,” said Hugo Llewelyn, Chief Executive Officer at Newcore Capital Management, a real estate investment manager, which became a B Corp in 2020.  

According to Antonini, the B Corp certification process provided First Sentier with a recognised external framework for measuring progress on key areas of its corporate sustainability strategy, such as environment, supply chains, diversity, equity and inclusion (DE&I) and community. 

“Certification does not change the investment process or application of the responsible investment principles. We see it as very complementary. Our investment teams will continue to operate with investment autonomy,” she said.  

Existing practices contributed to First Sentier’s score in the ‘customer’ category, including client advocacy, reporting and proxy voting. But certification also identified areas for improvement at an operational level. Due to a lack of effective measurement or anonymity of data, the firm was not able to evidence the full extent of volunteering, certain demographic information relating to employees, or consistent measurement of its environment footprint. 

Antonini added: “Over time, we will work with our clients and stakeholders to deliver reporting that provides greater transparency on how ESG is embedded within our business.” 

Rebuilding trust 

Asset managers have recently suffered from credibility problems for overstating the positive impact of their funds on people and planet. A number of firms have fallen foul of regulators, including German asset manager DWS, while new rules are being introduced in major jurisdictions to ensure funds’ names and claims are better aligned with their sustainability performance.  

At the same time, anti-ESG sentiment has been growing in some quarters, notably among Republican-led states in the US, which have taken action against a number of asset managers and banks. First Sentier’s Antonini said B Corp status had the potential to help asset managers to build trust with all stakeholders.  

“The certification means that there is a growing community of companies with a shared goal to transform the communities in which they live and operate for the benefit of the people and the planet,” she said.    

“Having B Corp Certification represents a commitment to meet the highest standards of social and environmental impact, which is increasingly a core focus of ESG-minded clients.” 

UK-based investment consultant Redington became B Corp certified last month, the first such firm to do so. Lee Georgs, Redington’s COO, said B Corp certification allows clients to identify leaders in sustainability. 

“Once attained, a company’s B Corp certification conveys signals that they have passed a highly rigorous and multi-layered assessment that measures their impact on all areas of the organisation,” she said.  

“It provides an ongoing framework against which to measure ourselves as a company, how we treat our valued employees and the communities we serve and inhabit, as well as how we ensure that our impact continually influences our strategy and in governance matters, holding ourselves to an equivalently high standard to that which we provide in our client default net zero client advice.” 

Georgs said attaining B Corp status would drive Redington to continue to improve its sustainability performance. “Becoming part of a community of like-minded companies will challenge us to keep pushing to do more. Only by challenging ourselves, our clients and our industry peers will we be able to contribute to tackling the sustainability issues we all face.”  

Purpose for pensions? 

Announcing the firm’s B Corp status, First Sentier Investors CEO Mark Steinberg said: “B Corp certification provides us with an important point of differentiation in our industry, and represents a commitment to meet the highest standards of social and environmental impact.”   

But there is little evidence as yet that institutional clients see B Corp status as a differentiator when selecting investment service providers. And in terms of seeking accreditation, asset managers have embraced the concept far more rapidly than asset owners. Around 20 insurers are currently accredited as B Corps, and only three pension plans.  

Pensions for Purpose – a UK-based B Corp that works with asset managers and pension funds to encourage the flow of capital towards impact investments – says B Corps are “not yet part of formal selection criteria that we know of”. However, Charlotte O’Leary, Pensions for Purpose’s CEO, said that investors are “becoming more aware of B Corp and its significance, and they certainly do notice those that hold this certification”. 

“Net Zero and Levelling Up are the greatest goals of our time. This can only happen in a world where companies’ goals align with those of society and the environment. B Corp represents exactly this and therefore was a very easy choice for us to make as an organisation”, said O’Leary.  

Karen Shackleton, Pensions for Purpose’s Founder and Chair, said attaining B Corp status was “an extension” of the firm’s mission. “We wanted Pensions for Purpose to be a case study on how organisations in and around the pensions industry can act, [and being a] B Corp is a part of that.” 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

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