Increased voting and engagement needed to tackle under-representation at all levels.
Bess Joffe, Head of Responsible Investment for the Church Commissioners, which manages the historical property assets of the Church of England, has called on asset owners and managers to encourage improvements in diversity and inclusion at investee companies.
Joffe was speaking on a panel at The Investment Association (IA) Annual Conference about the role of stewardship and sustainability in generating returns for investors. The Church Commissioners manages an investment fund with approximately £8 billion in assets under management.
Recent research published by the IA revealed almost three-quarters of FTSE 100 companies failed to report the ethnic make-up of their boards in this year’s AGM season, leading to investment managers demanding greater transparency from UK boards.
However, Joffe argued diversity and inclusion needs to be prioritised throughout the workforce, not just at a board level.
“Diversity and inclusion need to be addressed right down through company pipelines. We [at the Church Commissioners] would like to see increased voting and engagement around diversity and inclusion issues,” Joffe said.
A new taskforce was launched yesterday by City of London Corporation, aimed at increasing socio-economic diversity in financial and professional services across the UK , accompanied by a report.
Collaboration between asset owners and asset managers
Panellists said there was a risk of companies focusing on high-priority ESG concerns to the detriment of others, potentially focusing on improving climate-related disclosures, for example, but allowing harassment and bullying in the workplace to fall by the wayside.
The discussion also highlighted ongoing concerns around the effectiveness of communication between asset owners and asset managers on ESG issues. Earlier this month, the Association of Member Nominated Trustees (AMNT) reported that UK fund managers are routinely refusing to report or explain deviations from client voting policies in pooled funds.
Joffe said the Church Commissioners aims to support asset managers, working collaboratively when outlining commitments to ESG or sustainability issues, and called for better communication between asset managers and their owners, based on long-term commitment to responsible investing, rather than on short-term results.
Differences across asset classes
Public equities are reaching a “mature point” in terms of incorporating ESG factors, whereas other asset classes are seeing “quick development”, she noted. Investors therefore see short-term wins more frequently in one asset class over another. Understanding market nuances is key for asset owners looking to have more realistic expectations of manager performance, Joffe said.
“I do think it is challenging, but there are ways to effectively manage relationships and to push for progress over time. It’s got to be done in a pragmatic way, with a sympathetic view of where individual asset classes are in their integration of ESG issues and how this impacts asset manager performance.”