Responsible investments under scrutiny.
Published 17th January 2021 by Chris Dell
Communications operates in a new age of transparency. The individual has never been more able or felt more empowered to engage directly with companies.
This makes it harder than ever for a business to navigate the communications landscape successfully. Purpose, products and services fall more quickly under the spotlight and often when you are least expecting it.
And while the pioneers of this new age come from Gen Z and Millennials, attitudes have spread to the Baby Boomers so all businesses need to pay attention − behaviours are not confined to one demographic group.
What might this mean for asset management businesses, who, after all, traditionally have preferred to keep a low profile and keep what they think and do hidden from view and scrutiny?
And what impact does this have on those asset managers who are now putting responsible investing at the heart of their business – in terms of process and product?
Beware the power of scrutiny
Earlier this year we saw again how effective Extinction Rebellion was in forcing Oxford and Cambridge Universities’ pension funds to agree to screen out specific ‘unethical’ shares.
The storming of the PLSA conference in 2019 by Extinction Rebellion attracted less national coverage. Protestors challenged the 88 local government pension schemes to divest £14bn of fossil fuel investments, asking them to make much narrower investment choices for their funds.
Shareholder scrutiny is also on the rise. Minerva Analytics' 2020 UK Voting Review found the average overall dissent across all resolutions considered at shareholder meetings of the UK's largest 350 companies was 3.13% in 2020 (January to August). This is above the 2.93% level for the whole of 2019 and currently stands at its highest level in seven years.
Scrutiny is also at the heart of Climate Action 100, with its 500 investors representing more than USD $47 trillion in assets under management. They assess and report on 161 of the world’s largest greenhouse gas emitters; encouraging better governance, more site visits, better reporting requirements – all to help tackle climate change.
If not countered by the power of clear communications, scrutiny by noisy campaigners is in danger of bouncing pension scheme managers and asset managers into excluding companies or sectors.
Better for them to start to be more transparent and take control of the agenda by setting their investment strategy and explaining their choices. The alternative is finding they have their investment strategy dictated to them.
As Jack Welch said: Control your own destiny or someone else will
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