"Asset Owner Coalition of $1.5 trillion emphasizes fresh stewardship guidelines, focusing on manager accountability"
Asset Owners Issue Joint Statement on Climate Stewardship
A coalition of major asset owners representing over $1.5 trillion in assets has issued a joint statement on climate stewardship, calling for greater alignment with the pension scheme's objectives. The statement, which includes investors from the UK, Europe, Australia, and the US, such as Phoenix, Aegon, Scottish Widows, Nest, Sisters of Charity of St. Vincent de Paul of New York, Swiss Pensionskasse Basel-Stadt, and Australian Ethical Investment, aims to provide managers with clarity on expectations and empower stewardship teams to deliver on clients' objectives.
The asset manager stewardship is currently in crisis, with some of the world's largest asset managers, such as BlackRock, retreating on climate commitments. The coalition's statement comes in response to this crisis, emphasising the need for a systematic approach to voting, underpinned by a robust theory of change.
The joint statement outlines a framework for monitoring, engaging, and escalating when asset managers' stewardship practices fail to meet agreed climate-related standards. This framework includes setting stewardship targets, regular reporting and oversight, review and decision by an ESG Investment Committee (ESG IC), and escalation actions. When stewardship goals are not met, the ESG IC can decide on investment consequences for specific holdings, such as adjusting or withdrawing investments to enforce alignment with climate stewardship objectives.
Proxy voting at annual general meetings is also a key tool, serving as a means to hold investees accountable for climate-related performance and governance. The statement acknowledges that escalation isn't a one-size-fits-all process and varies among the signatories. The aim isn't to be punitive but to help managers improve.
The guidelines have been several years in the making, with an in-depth 2023 review by professor Andreas Hoepner finding significant misalignment between managers and asset owners on stewardship, particularly among larger US-based managers. The coalition's statement aims to address this misalignment and provide managers with greater clarity on their expectations.
Gupta, a leading figure in the coalition, expresses optimism that fund managers can deliver robust climate stewardship with empowerment from asset owner clients. However, the People's Pension may consider divesting from managers if insufficient progress on stewardship is made. The statement prioritises collaborative stewardship initiatives "where permissible".
The world has undergone significant changes since the initial review into stewardship alignment, with the re-election of Donald Trump as the President of the United States and the world's largest asset manager, BlackRock, recently announcing its departure from the Net Zero Asset Managers initiative. Despite these challenges, the coalition remains committed to driving change in the asset management industry and ensuring that climate stewardship is at the forefront of decision-making.
- In light of the global climate-change crisis, the joint statement emphasizes the need for environmental-science-backed strategies in the asset management industry, aiming to guide investors towards more responsible and sustainable business practices.
- Recognizing the potential financial risks associated with climate-change inaction, the coalition of asset owners encourages greater integration of climate-related considerations into investment decision-making processes, aiming to secure long-term financial gains while safeguarding the environment.
