A number of asset managers are stepping back from pushing for change in their investee companies, but clients are challenging them to do better, according to Paul Lee, head of stewardship and sustainable investment strategy at Redington.
In this Green Dream video interview, the head of stewardship and sustainable investment strategy described how the firm’s recently launched stewardship platform is allowing clients to monitor voting activity at fund groups and engagement more broadly, and noted the wider dispersion in the market from the strongest to the weakest as many have toned down their engagement activities.
He also discusses how the industry needs to do better at governing itself and his work as a member of the Taskforce on Social Factors.
Watch the full video interview above and read the transcript below.
NK: Hello and welcome back to the Green Dream video interview series. Today I have Paul Lee joining me from Redington. He is head of stewardship and sustainable investment strategy. Thanks very much for your time today. So I wanted to ask you about the enhanced stewardship platform that was launched in March to help asset owners understand the asset managers voting activities. If I’ve understood that correctly, I know it’s early days still, but have you noticed any voting patterns in what asset managers are up to?
PL: I guess the first thing to say is it’s not just voting. It’s stewardship more generally. So absolutely, we do look at manager voting activity, but we also look at their engagement more broadly, both in holding management of companies to account and public policy engagement. It’s right across the piece.
What have we found so far? We found quite a lot of differentiation in the market. You know, there are some managers who are doing all three elements pretty well. There are some that have strengths in one area or the other, and there are some that have weaknesses, frankly, across the piece. And what we’re finding is that we’re able to surface that in ways that bring it to life for clients so that they can feel empowered to hold their managers to account in a way that’s been really difficult for them up till now.
They rely on the managers to give them insights and information on the activity, and that disempowers the client. The aim is to re-empower the client and we’re succeeding in doing that.
NK: Okay, Fantastic. And are there any patterns in where asset managers are focusing on?
PL: You’ll not be surprised to hear that the biggest focus is climate right now. And there are some managers that have particularly strident approaches. I think it’s public knowledge there are some managers that have stepped back a bit from previous stronger positions to positions that are more supportive of companies, less strident in in their positioning about the need for change and moving forward.
That that has been a surprise for some clients to see the extent of some of those moves and to see the dispersion in the market between those who are being strongest and firmest about the need for change and the need for change soon, and those that are perhaps being less strong in that position.
NK: Therefore you engaging with those that have maybe taken that step back or you ask them why that is or pushing them back in that direction?
PL: Absolutely. The aim is that we that we help clients to challenge their managers to do better. Now, every manager can do better even those at the stronger end. But absolutely, the aim is that we can help the clients identify the problems, the gaps in what managers are delivering. And certainly if that’s a gap, that’s a broad one, not just a narrow one, it’s pretty easy to spot and therefore clients are actually, in our experience, very eager to challenge those managers that are that are stepping back and pressing them to do more, to do better.
Some of those managers are listening. But it’s early days to know whether that’s actually delivering change on the ground.
NK: Okay. Fantastic. And we’ve spoken to you in the past about our Campaign for Better Governance. How well do you think the industry is governing itself for the moment?
PL: I’m sad to say, I think we’ve still got a long way to go. I think we need a bit more honesty with ourselves. We have just rerun the Sustainable Investment survey that Redington carries out each year of managers across the market. Clearly, the managers that we recommend to clients, but also more generally, the managers across the market.
And we’re still seeing gaps between what they say they’re doing and what they’re delivering in practice. That ranges from what they’re doing in stewardship. You know, there are assertions that we think these issues are important and yet a lack of an ability to give us examples and case studies in those spaces. But it also applies in areas like their own diversity.
We’re still seeing managers who assert that, yes, the investment teams reflect the community around them, but which are predominantly male and have almost no ethnic diversity at all. Unless they are operating in a very strange and different part of the world from the rest of us, they just are misleading themselves that they are genuinely representative of the market.
NK: That’s really sad to hear but also very true. What would you say your clients are interested in at the moment? What are they most focused on from an ESG perspective?
PL: It’s very variable and we are seeing a lot of interest in stewardship. The new regulations from the DWP have definitely nudged clients across the piece to be more interested in that. Of course, we’re still seeing a lot of interest in climate. I mean, it’s an incredibly hot day today. We’re experiencing climate change right now, and that’s bringing home to people that the need for change.
I think we’re also seeing an appetite to go beyond climate and think more broadly about the S and G issues that matter, particularly perhaps social issues that have been relatively neglected by the market. And the Taskforce on Social Factors, which I’m a member of, is pulling forward its report by the end of this year. And I think well I certainly hope that that that will be a catalyst for more clients to think more deeply about some of those social issues which as I say, have been a little bit neglected up till now.
NK: Yeah, I agree with you on that point. And we are always end the Green Dream with this question. What is your favourite sustainable drink or snack?
PL: I’m not a big snacker, so maybe I’ll go with the drink side of things. I think the thing that we all need to think about with sustainability is food miles, so why not drink miles or booze miles? British beer has always been the best in the world, in my view at least. But at least now we’re seeing British wine are actually competing with the best.
I only buy English fizz these days because it is at least as good as the stuff that comes out of France and not as overpriced.
NK: Amazing. Thank you. It’s amazing how many of these are alcohol related from across the industry. But thank you very much for coming in today. Great to hear your insights on stewardship. Thank you very much.
PL: Thank you very much.