Stewardship – Discussion


But we hear from companies that their investors have told them to avoid long ter- mism or climate change at this point in time. Who are these investors? Where is the transparency? For example, some big oil and gas companies backtracked on their climate transition plan within a year. Feedback from investors is why, but who are the investors who supported that change. The companies won’t name them. This is where there is a lack of transparency. Thankfully, the Financial Conduct Author- ity and the Financial Reporting Council i are helping with the anti-ESG rhetoric coming from the US. It almost feels like it is on Europe to drive the world forward because Asia has its own challenges and there is the element of a just transition and large state ownerships, and the US has political headwinds as mentioned. Christie: In Europe, the regulatory envi- ronment and the goals of so many asset owners mean that everybody is rowing in the same boat. A lot of change and pro- gress is moving in the same direction. But you have to look at America from a different perspective. The idea of steward- ship and even voting shares is so different today from 10 years ago. Nobody was talk- ing about engagement 10 years ago and there were perhaps a handful of resolu- tions. In the past four years, however, the number of resolutions has quadrupled. Shareholders are now more active because they care. They are voting because they want to see change. There is always going to be a two-steps-forward-one-step-back situation, but you cannot put that genie back in the bottle.


The managers I cover are putting lots of resources and people behind steward- ship. Some, of course, are using it to say they are doing things that they are not, and there has been a backlash. But clients care about engagement, as so much of this is financially material.


This is a generational change. There is going to be a huge transformation and the investment managers I speak to want in


Portfolios are changing because ownership is


changing. Deborah Christie Managing director Cambridge Associates


on these opportunities. Portfolios are changing because ownership is changing. Gilshan: There are structural differences in the US that are worth reflecting on. It does not have regulatory-backed corpo- rate governance or stewardship codes. Investors engaging with independent board members of US companies is a rela- tively newish concept, but I would be care- ful not to present Europe as a panacea. Marks: We are talking about the influence shareholders can have through engage- ment, but as an asset manager, are we doing what our clients want us to do? Are we voting? The answer is yes. If we see an appreciation of our influence and if it creates engagement with our cli- ents on a subject that they care about then that can only be a good thing. In fact, we are doing what we should be doing: listen- ing to our clients because we are stewards of their assets. Rawson: On the point around not having the bandwidth to engage with everything, I am sympathetic to that. But there is a system failure. While it is true that indi- vidual investors do not have the resources to engage across the portfolio, there is also no effective collaboration. It is not just fears of anti-trust. You hear it among UK investors who have no concerns around collaborative engagement.


All investors have a responsibility to vote their shares, regardless of whether you have engaged or not. If you have a group of investors who have been thoughtfully and transparently engaging a company on an issue over a period of time you need to back them when they put forward a share- holder resolution or advocate for a vote against directors.


The number one reason investors say they cannot back a shareholder proposal is because they have not engaged with the company. Well, you cannot engage every company, but you can listen to your peers in a non-competitive way and support them. As a whole, we can drive the system transformation that we need to see.


Are unified voices more successful in driv- ing change? Gupta: We are talking about system change. If a significant body of investors are having the same conversation, their voice is amplified and is taken with a certain seri- ousness. It is more efficient, more practi- cal and it’s pulling in the same direction. We have seen some success, but there is more work to be done. It is a fairly new concept and so there are lessons to be learned, but it is happening.


That said, we have to be cognizant that there are instances where you might change tack.


Issue 125 | July-August 2023 | portfolio institutional | 41


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