Stewardship survey showed asset owners intend to adopt ‘hands-on’ approach – bringing ESG assessments in-house.
Asset owners are engaging more regularly with ESG issues through their asset managers, but plan to do more in-house in the future, according to the ‘2020 Asset Owner Stewardship Survey’ report, recently published by Institutional Shareholder Services (ISS) Governance.
ISS Governance’s stewardship survey took place between July and August 2020 and included asset owners, asset managers and other investors, largely from North America. Asset owner respondents included public and corporate pension funds, sovereign wealth funds, insurance companies and health care pension funds – 63% of which were from the US.
Findings showed that 78% of respondents engage directly and/or instruct their managers to engage with companies on ESG issues; with 14% currently interacting with companies directly.
ISS further reported that asset owners are more focused on engaging with companies, rather than assessing ESG risks and opportunities themselves.
Just 13% of surveyed asset owners said they internally assess ESG risks and opportunities for the companies in their portfolios, whereas a further 34% urge external managers to assess ESG risks and opportunities in the portfolio(s).
“The share of respondents that instruct their managers to assess ESG risks and opportunities is slightly smaller than those that urge their external asset managers to engage with companies (34% versus 43%, respectively),” the report noted.
According to the survey, 57% of respondents either vote their own proxies or provide voting instructions to their investment managers. Only 8% stated they do not vote in proxies or ask their managers to do so, thus reflecting the willingness of asset owners to influence ESG issues in investee companies.
Bringing ESG assessments in-house
The survey also highlighted an increasing desire from some asset owners to conduct ESG assessments in-house.
More than a fifth of respondents (22%) said they intend to bring assessments of ESG risks and opportunities in-house as a single task, whereas 29% said their intention is to do this “in conjunction with either voting proxies or company engagement”.
Asked which specific ESG topics they intend to prioritise in 2021, the majority of asset owners (99 respondents) cited human capital management, followed by diversity (95 respondents) and climate change risks (39 respondents).
“Asset owners expressed an increased interest in becoming more directly involved in stewardship activities, including those related to company engagement, ESG assessment and proxy voting,” the report said.