Responsible investment (RI) policies have become the norm for asset managers worldwide, with the majority also now linking remuneration with sustainability risks.
That is according to findings from Redington's second annual Sustainable Investment Survey, which questioned 112 asset managers responsible for $10trn (£7.4trn) collectively across 220 strategies.
The research shows that 99% now have firm-wide RI policies in place, with dedicated RI headcount increasing by 15% since last year.
Perhaps more importantly, the number of firms linking remuneration to integration of sustainability risks has increased by a fifth, with 70% of asset managers now doing so.
Moreover, the proportion of companies reporting in line with the Task Force on Climate-Related Financial Disclosures has risen from 28% to 45% since last year.
However, only 74% and 61% of asset managers could provide evidence of environmental, social and governance (ESG) considerations influencing their respective buy or sell decisions over the past six months.
This is despite 78% saying that they expect ESG integration to have an additive impact on financial performance.
“Given that almost all asset managers, across most asset classes, indicate that ESG factors influence their investment decisions at least sometimes, we would like to see these words being backed up more substantially by investment actions,” said Paul Lee, head of stewardship and sustainable investment strategy at Redington.
“Setting policies and processes is just the beginning. What’s really needed to further the sustainability agenda within the asset management community is a tangible link between ESG analysis and investment decisions.”
The survey findings also show that 83% of companies claim to have a firm-wide stewardship and voting policy, which, on average, covers over 88% of assets under management.
However, of those with a stewardship and voting policy covering all assets under management, only 44% voted on 100% of resolutions, and almost 10% did not exercise any voting rights at all.
Redington also analysed engagement efforts by asking asset managers to differentiate between deep engagements, which involve at least three back-and-forth dialogues between a manager and company, and light engagements, which consist of fewer than three dialogues.
While over 60% of real asset engagements were considered deep engagements, this compared to just 15% of equity engagements. Meanwhile, responses from credit managers showed that they were not undertaking any engagement across 75% of their overall portfolios on average.
“Engagement is an incredibly powerful catalyst for positive and sustainable change,” said Nick Samuels, head of manager research at Redington.
“While it’s encouraging to see indications of a high level of thoughtfulness on the part of real asset managers, we would expect a higher proportion of deep engagements across equity strategies, too – especially given the asset managers’ level of influence as shareholders.
“It’s particularly surprising to see such a low proportion of credit portfolio holdings – 25% on average – facing engagement from asset managers.
“Credit investors are often uniquely equipped to be able to shift attitudes and practices. We would like to see them make full use of this influence and engage with borrowers to drive change on material ESG risks and opportunities, particularly at initial issuance.
“As stewards of the world’s capital, asset managers are in a prime position to maintain dialogues and positively influence a broad range of stakeholders."
Image credit: iStock
Author: Chris Seekings