"Asset Owner Coalition, controlling $1.5 trillion, establishes fresh guidelines for manager oversight in line with governance coordination"
In a critical moment, following the world's largest asset manager, BlackRock, leaving the Net Zero Asset Managers initiative, asset owners from around the globe have taken a significant step towards enhancing climate stewardship.
For several years, the issue of stewardship alignment between asset owners and managers has been a concern, with UK asset owners leading discussions to explore ways to achieve greater alignment on climate stewardship. The aim isn't to be punitive but to help managers improve, setting firm expectations for meaningful and effective engagement on climate change.
Asset owners, such as pension funds and sovereign wealth funds, are increasingly frustrated with asset managers who waver under political pressures or who reduce stewardship to inconsequential actions. By providing clear, unified demands for rigorous stewardship and accountability, asset owners can hold asset managers accountable to their sustainability commitments and prevent them from diluting climate-related efforts to appease anti-ESG forces.
Clearer input from asset owners can reverse the crisis in asset manager stewardship. This clarity pressures asset managers to improve their climate-related disclosure, reporting, and engagement practices, which are essential foundations for effective stewardship.
A coalition of asset owners representing more than $1.5 trillion in assets has issued a joint statement on climate stewardship, calling on managers to use a combination of industry and public policy engagement, prioritise collaborative stewardship initiatives, and adopt a systematic approach to voting, underpinned by a robust theory of change. The coalition includes major investors from the UK, Europe, Australia, and the US.
If meaningful progress isn't achieved within a reasonable period, further steps will be taken. One such step could be a downgrade in asset manager ratings, a reassessment of the mandate, or the selection of asset managers demonstrating greater alignment with the pension scheme's objectives.
The People's Pension, for instance, has previously stated it would consider divesting from managers if insufficient progress on stewardship is made. Poor or misaligned stewardship activity could lead to similar consequences for other asset managers.
An in-depth 2023 review by professor Andreas Hoepner found significant misalignment between managers and asset owners on stewardship, particularly among larger US-based managers. This review underscores the need for clearer, more unified input from asset owners to ensure stewardship activity is substantive and effective in addressing climate-related risks.
The asset owner guideline includes a range of escalation mechanisms, providing managers with greater clarity on their expectations, not to dictate every move but to provide clarity on long-term expectations and empower stewardship teams.
For further information or to sign up to the statement, contact [email protected].
- Encouraged by BlackRock's departure from the Net Zero Asset Managers initiative, environmental-science advocates are urging for more finance investments to combat climate-change, aligning with the principles of environmental-science and business objectives.
- In light of the critical need for climate-change mitigation, the coalition of asset owners, representing over $1.5 trillion, are urging asset managers to incorporate science-based climate-change solutions, aligning financial strategies with environmental-science and fostering sustainable business practices.
