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ESG Investing Benchmark Report Gives Asset Managers Mixed Scorecard

Current practice “a world away from what is needed”, says ShareAction, flagging voting records and training among areas of concern.

A new research report on ESG investing practices among asset managers has been released by UK-based responsible investment NGO ShareAction.

The report is intended to help asset owners to benchmark their own managers across a range of core ESG investing areas, including responsible investment governance, climate change, human and labour rights, and biodiversity.

Titled ‘Point of No Returns: Part V – Leading Practice’, the report is part of a series launched by ShareAction last March, which ranks the responsible investment performance of 75 asset managers globally. It also draws on publications from by the 20 highest scoring asset managers up to February 2021.

Although the report includes checklists and named case studies to highlight examples of good practice, ShareAction asserted that no one asset manager had an exemplary record across all or even most areas covered.

“Current leading practice is still a world away from what is needed of the sector to meet the challenges presented by the systemic risks considered in this report,” said report co-author Isobel Mitchell.

The most frequently cited asset managers in the report were BNP Paribas Asset Management, NN Investment Partners, AXA Investment Managers, Robeco, and Legal & General Investment Management.

Aviva Investors and RBC Global Asset Management were noted for their voting policies, while Bank J. Safra Sarasin and ACTIAM were commended on climate change and biodiversity respectively.

‘Tea and biscuits’ engagement

Ahead of the 2021 AGMs of many listed firms, the report flags examples of best practice in proxy voting, identifying an asset manager’s voting record and an important test of their commitment to stewardship.

The report cites the willingness of several leading asset managers to vote against directors on ESG-based risks as “promising developments”, but criticised firms that continue to claim a preference for private engagement over public confrontation.

“Engaging without voting is ‘tea and biscuits’ engagement, providing little incentive for investee companies to change. Asset managers must back up private engagement by voting for ESG resolutions to avoid sending mixed messages,” added Mitchell.

As well as listing leading practice and case studies, each of the report’s four sections highlights next steps and, where appropriate, examples of industry resistance.

Industry resistance on training

Leading practice on training should include regular, mandatory sessions for all relevant staff, ShareAction asserted, extended across asset classes and leveraging external expertise. But the report also notes that some managers have argued that day-to-day knowledge-sharing on ESG investment topics is sufficient.

“ShareAction believes that systemic issues, including climate change and biodiversity, require training to help understand not only risks at the portfolio level, but also the real-world adverse impacts of investment behaviours. A stronger standard for ESG training is required that brings in external scientific expertise and is undertaken throughout the organisation,” the report countered.

In December, the CFA Institute released a report which flagged an ESG investing skills gap among many investment professionals, and called for a stronger emphasis on training.

“Investment firms that incorporate sustainability into their business models need access to specialist knowledge to enrich their investment capabilities and to bridge the data gaps,” said Rhodri Preece, Senior Head of Industry Research for the CFA Institute, told ESG Investor.

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 © 2021 ESG Investor Ltd. Company No. 12893343

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