| Celebrating the winners in the Institutional Asset Manager Awards 2023 Thursday evening saw the Institutional Asset Manager service providers’s awards event held in London and attended by winners who form the backbone of the institutional investment management industry. In a week the Institutional Asset Manager Awards 2023 report will be released, with interviews from some of our winners and pictures from the awards’ event. Many congratulations to all our winners.
COP28 opened this week with a "resounding call to accelerate collective climate action" which includes every player from policymaker to company to asset manager and their investors.
Yet still we hear that there are failures across the board in ensuring that the world keeps temperature increases within 1.5°C.
This week we report that scepticism is running high among investors over the validity of sustainability claims made by the companies in which they invest.
According to
PwC’s 2023 Global Investor Survey, more than nine in 10 investors (94 per cent) believe corporate reporting on sustainability performance contains unsupported claims, which makes it all the more concerning that asset managers appear to be failing to uphold their stewardship duties.
Following the recent news that the ETF sector was underdelivering on shareholder governance, so this week we report similar complaints in the UK Asset Owner Stewardship Review 2023 which reports a "substantial divergence as to [asset managers’] interpretation of shareholders’ and even society’s interests".
The review also reveals a persistent focus on "short-term commercial gain rather than considering the long-term impact of some corporations based scientific evidence".
Author of the review Andreas Hoepner, who is Full Professor of Operational Risk, Banking & Finance, Smurfit Graduate Business School, University College Dublin, argues that despite
unequivocal warnings from the United Nations and the Intergovernmental Panel on Climate Change of the risks of delayed action on climate change "short-term interests of asset managers may be trumping long-term interests of pension funds".
Hoepner dismisses the argument that asset managers are merely carrying out their fiduciary duty, noting that this is a misunderstanding about the importance of risk reduction and results in the prevention of fiduciary duty itself.
"Following the prudent man rule, asset managers should develop a process which aims to achieve a high return per unit of risk. Engagement, if successful, has been found to be significantly risk reducing and hence supportive of fiduciary duty," Hoepner says.
That this still needs to be pointed out seems surprising given that this September the UK Financial Reporting Council reported record signatories to its UK Stewardship code with numbers reaching 277 signatories to the Code, of
which 189 are asset managers.
This suggests that while there is superficial support for corporate governance, asset managers are more concerned about delivering short-term performance rather than effecting positive environmental change.
Without a joined up approach from asset owners and their managers on corporate governance, companies will be able to make spurious sustainability claims with no recourse. If that continues to happen – as 94 per cent of investors believe to be the case – then the chance of keeping what COP28 President Dr Sultan Al Jaber calls the "the north star 1.5°C" within reach seems somewhat unlikely.
Gill Wadsworth, Editor
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