Share Action Responsible Investment Report
Share Action, an international research institution, releases a report to investigate 77 asset management companies in the world, to provide the practice of asset management industry in responsible investment, and put forward suggestions to different participants (Asset Owners and Asset Managers).
Share Action believes that the global economic outlook is affected by more and more environmental and social problems. As an essential part of the financial industry, asset management companies need to participate in responsible investment and provide more positive externalities while providing financial returns for investors.
Responsible Investment in Asset Management Industry
In the report, Share Action investigates responsible investment practices of asset management companies in five fields, namely governance, stewardship, climate, biodiversity and social.
Among the five areas, governance and management have the highest average level of development, followed by society and climate. The level of biodiversity development is the lowest. The specific situation of each field is as follows:
- In terms of governance and stewardship, two thirds of the asset management companies said that the board of directors had the responsibility to supervise responsible investment, and one third of the companies formulated relevant KPIs for the board of directors. In terms of stewardship, 82% formulated voting policies on environmental issues and 81% formulated voting policies on social issues, up from 56% and 53%. More than half of asset management companies have played an active role by disinvestment and other methods;
- In terms of climate, most asset management companies still need for improvement. 22% formulated special climate-related investment policies, and 10% considered climate investment methods in ESG funds. 53% set a net zero target for 2050, and 22% publicly released a climate transition plan;
- In terms of biodiversity, the progress of asset management companies is relatively slow. Only 10% of asset management companies have formulated an exclusive biodiversity policy, and another 34% have included biodiversity in the responsible investment policy. 20% of asset management companies monitor the operation of companies in important biodiversity areas, but 62% have no commitment to ecosystem protection;
- In terms of social, only 5% of asset management companies have formulated exclusive biodiversity policies, and another 51% have included biodiversity in responsible investment policies. A few asset management companies have considered key social themes, most of which are still concentrated in the labor force (86%) and public health (61%);
Responsible Investment of Asset Management Companies
Share Action ranks the responsible investment behaviors of 77 asset management companies based on the above five areas and finds the following characteristics:
- Asset management companies in Europe performed best. The top ten in the report are all from Europe, which is related to the higher regulatory requirements for responsible investment;
- The lower ranking asset management companies have larger management scale. The bottom 35% of companies manage 50% of assets, while the top 30% of companies manage only 23% of assets;
- Asset management companies with passive investment can also rank high in responsible investment. Despite certain restrictions, companies that invest passively can adopt responsible investment well;
Suggestions for Different Participants
In the report, Share Action puts forward suggestions for asset owners and asset managers respectively:
There is no way for asset owners to avoid a wide range of risks through diversified investment, and the implementation of responsible investment is an inevitable choice. According to the report, asset owners can strengthen due diligence on asset management companies, strengthen the expectation of responsible investment in climate, biodiversity and society, and select asset management companies with superior responsible investment through allocation.
Asset managers need to identify, manage and report the impact of investment decisions on sustainability issues under the development trend of responsible investment, and consider setting net zero targets and climate transition plans to strengthen responsible investment policies. Asset managers can also influence the investee company through stewardship.