Charities including Guy’s and St Thomas’s Charity and Friends Provident Foundation are concerned that asset managers are not doing enough on ethical investment.
The charities were responding to a survey of dozens of asset managers prepared for the Charities Responsible Investment Network (CRIN), which showed that the majority of managers still had no investment targets related to climate change.
The survey of 37 asset managers making investments on behalf of CRIN members was conducted by ShareAction.
Climate change and governance
The research found that 54% of asset managers have not set investment targets linked to reducing the impact of climate change.
It also showed that just one in three managers – 36% – made executive pay conditional on how funds performed on responsible investment issues.
The average proportion of women on the boards of those asset managers had risen from 23% to 31% since 2018, while the proportion of board members from Black and ethnic minority backgrounds had grown from 5% to 6%.
ShareAction found that 59% of the asset managers surveyed published their voting decisions while under half – 49% – published a rationale for these decisions.
Danger of 'discrediting' ESG investing
Colin Baines, investment engagement manager at Friends Provident Foundation, said: “This really ought to be amongst the basics of any ESG [environmental, society and governance] policy.
“If asset managers wish to be taken seriously on ESG, they need to adopt a presumption in favour of ESG resolutions, taking a comply-or-explain approach.
“You cannot claim to be engaging on ESG issues and then vote against what you are engaging for, it discredits the entire concept.”
Matthias Lomas, engagement manage on investment at Guy’s and St Thomas’ Charity, said: “Given their influence over companies, asset managers have a fantastic opportunity to help build a more equitable and sustainable economy.
“We therefore encourage all asset managers to publicly disclose their full voting decisions.
“Greater transparency would help paint a clearer picture of their commitment to positive change.”
Charity investment screening
In a separate report, the EIRIS Foundation said that “more needs to be done” by charities and their asset managers to improve responsible investment policies.
Its research, Responsible Investment in Charity Pooled Funds 2021, found that two-thirds of charity-specific funds – 67% – screen their investment for more than just tobacco investments, up from 36% in 2013.
Negative screening policies still mainly focus on so-called sin stocks like tobacco, alcohol, armaments, gambling and pornography, the report said, but funds face growing demands to broaden this list.
Nearly one in five funds don’t use any negative screen at all.
The research also showed that the proportion of funds applying positive screens, by proactively identifying responsible investment opportunities, has grown from 20% to 30% since 2013.
A £19bn question
Lisa Stonestreet, head of communications & charity impact at the EIRIS Foundation and the report’s author, said: “We believe that charities, whether through their own investment choices or through their influence and engagement with the finance sector, have a vital role to play in the transformation to a more sustainable and equitable economy.”
James Corah, head of responsible & ethical investment at the charity fund manager CCLA, said that the report was “a wake-up call that more needs to be done”.
The report said that charity-specific pooled funds accounts for £19.4bn, approximately 17.5% of all charity investments in the UK.
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