WHEB Asset Management (WHEB), the impact investing pioneer and early adopter of the SDR ‘sustainability impact’ fund label, has issued a White Paper outlining the urgency for industry consensus on stewardship and engagement definitions and practices.
In September, the FCA dropped its stewardship outcome framework citing “challenging” complexities. Earlier this year, the Financial Reporting Council (FRC) embarked on a “significant update” to its Stewardship Code to reduce reporting burdens and strengthen stewardship outcomes.
Today, WHEB Asset Management publishes its White Paper – ‘From obstacles to outcomes: Enhancing effectiveness in stewardship and engagement’ – to promote industry dialogue about the inefficiencies within the ‘stewardship ecosystem’ comprising asset owners, asset managers, creditors, companies, regulators, investment consultants, advisors and service providers.
The whitepaper highlighted three key barriers the industry needs to overcome to make sure investor stewardship and engagement is at its full potential:
· Reaching consensus on key definitions such as what an ‘engagement’ actually is and how effectiveness should be measured.
· Focusing on engagement effectiveness in achieving clear objectives and not just levels of activity, and
· Better reporting and communication of the outcomes that have been achieved, evidencing how a specific investor contributes to an outcome and how this delivers value for clients.
Rachael Monteiro, Stewardship & Climate Analyst at WHEB Asset Management, says: “‘More activity’ appears to have become the dominant narrative in investor stewardship and engagement in recent years. In our view, this misses the point. Instead, the focus should be on ‘more effective’ stewardship and engagement that fulfils its purpose in delivering long-term value for clients.
“The stewardship and engagement industry is at a critical juncture. Fiduciary duty, client demand and now regulatory requirements are creating real appetite for more effective engagement. The industry needs to tackle three key barriers if its potential is to be realised.”
Seb Beloe, Partner and Head of Research at WHEB Asset Management, added: “We see these obstacles not as existential threats, but as growing pains symbolic of the rapid development in stewardship and engagement practices. Good practices developed by WHEB and other practitioners are outlined in the paper. These offer potential solutions to strengthen the role asset owners, managers and other practitioners can play in helping to accelerate the delivery of a zero-carbon and more sustainable global economy.”
