BLOG: Lifting the lid on asset manager performance on responsible investment

Most charities with investments employ asset managers to manage those investments on their behalf. For equity investments, asset managers may choose which companies to invest in, engage with companies about their activities, and vote at companies’ AGMs on behalf of their charity clients. It is important for charities to make sure that their asset manager(s) are managing their investments in a responsible manner that is line with the charity’s mission.

ShareAction has conducted a benchmarking survey of 40 leading European asset managers, who have a combined £18trn in assets under management, assessing their responsible investment performance. Responsible investment (RI) is investing in a way that takes into account the investment’s environmental and social impacts. Charities can use this survey as a tool to assess how well their asset managers are doing this, compared to others.

ShareAction’s research found that all the firms surveyed claim a commitment to responsible investment. But, despite this public commitment, there is a wide variety in the actual quality of RI performance and disclosures. The major themes in the survey are RI policies, voting and engagement disclosure, impact measurement, conflicts of interest, fees and charges, and internal governance on RI. We found that most asset managers have policies on these topics in place, but similarly there is variation in the level of detail. Most asset managers had policies focussing on governance issues, and much less on environmental or social issues.

Voting and engagement disclosure is important in allowing clients and other beneficiaries to see how their asset managers have voted and whether their voting decisions were well informed, consistent, and in clients’ best interests. We found that the majority of asset managers disclose information about their voting decisions. But, very few disclose the rationale for voting decisions. We encourage asset managers to do this, as it shows stakeholders whether their manager has made a decision that benefits their client and is in line with the voting policy. Charities can help to improve this situation by encouraging their asset managers to disclose more information about their voting decisions, and using this to challenge asset managers about these.

We also reviewed asset managers’ information about the impacts of their investments. Most asset managers say that they look at the social and environmental impacts as part of their responsible investment approach. But, do they actually track and test this? We found that, although most mention impacts on their website or in their reports, only a couple actually provide any in-depth information.

Impact measurement is important because it allows clients to assess the effects of an asset manager’s RI decisions. For charities in particular, information about impact allows them to assess how the asset managers’ decisions support their charitable mission. Charities can push their asset managers to disclose more information about the impacts of their engagement with companies.

Another focus in the survey is fees and charges. This is a contentious issue that has received more attention over the last few years. We looked at the accessibility and clarity of the available information relating to fund fees and charges. ShareAction believes that firms need to be responsible to their clients and show ethical behaviour. This includes being transparent about the true costs of the services provided. Almost all asset managers provide the legal minimum of disclosure in a Key Investor Information Document (KIID). However, only seven asset managers go beyond the legal requirement and try to give more comprehensive information on direct and indirect costs.

Members of the Charities Responsible Investment Network will be using the information gathered in this survey to collectively engage with asset managers to improve their performance. If you would like more information about this, please contact Catherine.Howarth@shareaction.org

Nandi de Haas is a research officer at ShareAction. Email Nandi for more information on the survey.

    Share Story:

Recent Stories