Stewardship – Discussion


Rawson: What about focusing on outcomes? Chapman: We have a focus on outcomes. We talked about attribution sometimes being difficult to achieve. There is a strong focus on this and perhaps we need to look at the quality of some of those outcomes. Marks: When we start a stewardship engagement, we should always be thoughtful of the change we are seeking, why we are seeking that change and how we will know we are achieving change. If you don’t get the outcome that you were seeking, it does not necessarily mean that the engagement was not worthwhile.


Deborah, what do you think of the quality of stewardship reporting? Christie: It is improving, but transparency is key and we are not always getting that. I talk to boutique managers all the time, who tell me anecdotes in person, but they do not report on anything. Again, the US is further behind Europe. It has some requirements and is moving towards more, but it currently still is a mixed bag. Gupta: We are not the police, but we are investigating in a measured way. For exam- ple, we are asking companies if deforestation has happened and if are they monitoring it. Thankfully, there is now special data com- ing, which we have to see how reliable and


credible it is, but it is hard when you are sit- ting through a desktop as companies come prepared with good anecdotal examples for meetings with investors. It is hard. I don’t know exactly what level of reporting will give us that level of dis- closure, but advances are being made. Rawson: What is the quality of the advice consultants provide asset owners? It is my impression that there is a lot more they could do to provide objective information about the quality of stewardship, particu- larly for some of the environmental and social outcomes. Christie: I do not know what my peers are doing on a day-to-day basis, but I can tell you that we are actively engaging with all asset managers on behalf of our clients. We have, particularly in the United States, huge initiatives behind diversity, equity and inclusion because we have clients who care about this topic. They have cre- ated escalation policies for their manag- ers and want to know where they stand in terms of diverse ownership.


Clients are asking what their investment managers look like in terms of diversity today. Where do they want to be in five years? How are they going to get there? What’s our manager’s escalation policy? If the investment firm is made up of five white men who are managing this bou- tique, is that okay with us? What are they


doing to change this and achieve a diversity of thought? What are their policies? Do they have a diversity, equity and inclusion policy? How often is this policy reviewed and updated? Who is involved in that process? We are having these conversations with investment managers – then the client has to decide for how many years they are willing to have this conversation. Bishop: Do you rate managers on steward- ship and diversity? Christie: Stewardship and diversity are aspects of how we evaluate managers. Some clients care about this, some don’t. First and foremost, we are looking for a high return for all of our clients, but their needs and unique goals have to be taken into consideration.


Portfolios are changing because ownership is


changing. Deborah Gilshan Adviser, investment stewardship & ESG


Founder of The 100% Club


They not only want a return, but they might also look for more manager diversity or to be moving towards net zero. Clients need to understand all of these issues, so we do the due diligence for them. We provide the information so cli- ents can make the best decision for their specific, and unique needs. Gilshan: One of the most powerful state- ments I have seen from an asset owner on diversity, equity and inclusion was a letter from the late David Swensen, who at the time was chief investment officer of the Yale Endowment Fund. He wrote to all of the fund’s external managers to highlight the collective responsibility on diversity, equity and inclusion, in terms of making financial services and invest- ment more diverse.


It was so insightful and demonstrative of the power of asset owners to use the levers they have to drive change. I applaud him for doing that.


Issue 125 | July-August 2023 | portfolio institutional | 45


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