Asset managers are improving their internal responsible investing policies and practices, but not taking the important next steps to make real change, according to a ShareAction report released Sunday.
"There is a lot more that asset managers can and should be doing, given the urgency" of climate change and related ESG challenges, Danielle Vrublevskis, senior research and monitoring officer with the responsible investing advocacy group, said in an interview. "They have started building the foundations but they haven't got the building up yet."
ShareAction evaluates money managers in Europe, the U.S. and Asia-Pacific every two years on whether their investment policies focus on ESG indicators such as climate, biodiversity, social, governance and stewardship.
The second report in a series, Point of no return, asked 77 of the largest asset managers globally about their governance and stewardship standards and compared them to results two years ago.
Managers made "considerable progress" on senior-level accountability and voting data disclosures, with three times as many of them now holding their board responsible for ESG-related concerns, and more than four-fifths now with voting policies on climate and social issues.
Financial incentives for responsible investment were reported by 83% of the asset managers, compared to 7% two years ago, but at the senior level they were reported by 27%.
What asset managers need to do next, the report said, is take "real-world actions" that include committing to divest, reduce holdings or not purchasing new debt from problematic companies. Roughly half of the asset managers surveyed reported doing so.
While most managers disclose their proxy votes publicly, for example, only three predeclare their voting intentions, which would spur progress, the report said. Consequences for companies not meeting asset manager expectations are also lacking, it said.
Only 13% of the managers surveyed disclose the portfolio impacts from ESG issues to their clients, which would help inform pension fund participants and investors, the report said. "There is a real disconnect because a lot of the clients don't know what their asset managers are doing," said Ms. Vrublevskis.
By region, European asset managers performed highest in the stewardship and governance rankings, with the top 10 based in Europe or the U.K.
On diversity, asset managers "have a long way to go to ensure gender equality on their boards, but two-thirds reported policies or practices to improve that, the report said.
Some asset managers noticeably improved since the 2020 report. Deka Investment, Santander Asset Management, SEB Investment Management, T. Rowe Price and notably, J.P. Morgan Asset Management, improved by more than 30 places in the rankings, after adopting effective policies across one or more of the themes that ShareAction investigates.
Best practices were not differentiated by asset size, asset class or strategy. "Whatever type of asset manager you are, you can really make improvements," said Ms. Vrublevskis.
