While I can’t see many asset managers abseiling down buildings to make a public display like Greenpeace activists, they can potentially be even more influential behind the scenes. After all they are the owners of quoted companies like Kleenex parent Kimberly-Clark, not just an irritating flee on their hide.
However, according a report from Fair Pensions, many fund management firms are missing a trick. A great many of them are failing miserably when it comes to persuading businesses in which they invest to behave in a more environmentally responsible and sustainable manner.
Fair Pensions’ latest report, Investor Responsibility? UK fund managers performance and accountability on extra-financial risks, raps the investment industry over the knuckles where ESG (environmental and social governance) is concerned.
The report says that, even though there has been some improvement compared to last year, “the extent and quality of responsible investment practices amongst asset managers does not yet inspire confidence overall. In particular there remains a narrow focus on governance issues rather than a broader engagement on environmental and social considerations.”
Interestingly, however, the report showed that the seven asset management groups which do take responsible investing and ESG accountability most seriously — and which have most integrated such things into their investment decision-making — are all UK-headquartered.
F&C ranked top with an overall score of 100% a long way ahead of Hermes and Insight which both scored 86%. The highest overseas-owned group in the Fair Pensions survey was Paris-headquartered Axa Investment Managers, which had a score of 58%. The top-ranked US headquartered group operating in the UK was Fidelity Investments, also with 58%.
The bottom of the chart was peopled by South African, Swiss and Belgian-owned groups. These were respectively Invesco Perpetual (5%), Credit Suisse (5%) and Artemis (11%).
Fair Pensions believes that asset managers have a long way to go before they can reassure their clients and wider society that they are able to protect and enhance value in connection with environmental, social and corporate governance factors.
The report said: “Of the 22 asset managers that disclosed a policy on environmental and social governance issues, 19 covered only corporate governance issues, while only F&C, Insight and Standard Life could explain their policy on environmental and social factors in any detail.
“Similarly, on corporate engagement, although the overall score for the 30 asset managers on ESG engagement was 53%, this fell to a mere 25% when environmental and social issues were considered separately from governance.
Fair pensions believes that proper investment analysis of environmental and social risks and opportunities is only practiced by a small niche in the industry. It argues that this is a cause for concern, as the “risks associated with environmental and social mismanagement by companies can be as damaging to value as governance issues both in the short and the long run.”
And less than half of the asset managers that were engaging on so-called ‘ESG’ issues were having any influence on the behaviour of companies in which they had invested. There was also a severe lack of transparency, with 75% of the asset managers surveyed not revealing their engagement activities, except to their own clients.
The report said that many leading asset managers now acknowledge that integrating ESG issues into their investment decision-making is financially relevant. The report concluded by saying: “Ignoring ESG issues will become increasingly ill-advised from a commercial perspective for the UK’s leading asset managers.”
So, while one wouldn’t necessarily expect many asset managers to don overalls and scale the exterior of office buildings, Fair Pensions’ overall verdict is definitely “could do better.”
Asset management company / % Score
F&C Asset Management 100
Hermes Fund Managers 86
Insight Investment 86
Aviva Investors (Morley) 83
Standard Life Investments 69
Baillie Gifford 66
HSBC / GAM 66
AXA Investment Managers 58
Fidelity 58
Newton 58
Schroders 55
Aberdeen 50
UBS 47
BlackRock 44
Henderson 44
Legal & General 41
JP Morgan Asset Mgmnt. 41
Barclays Global Investors 30
Wellington 30
AllianceBernstein 27
Capital International 27
Morgan Stanley Asset Mgmnt 27
Threadneedle 27
Goldman Sachs Asset Mgmnt 25
SSgA 19
SWIP 16
Artemis 11
Credit Suisse Asset Mgmnt 5
Invesco Perpetual 5
This blog was published on 13 November 2008