Stockholm (NordSIP) – According to a recent report by Redington, a UK-based investment consultant, asset managers need to redouble their efforts to address climate change and diversity. The report surveyed 104 asset managers across 192 strategies around the globe, covering equities, credit, multi-asset, private debt, property, infrastructure and LDI on 96 ESG questions.
ESG Integration, Decision-Making and Staff
According to the survey, 96% of managers have a company-wide responsible investment policy in place. 73% of managers expect their ESG integration to contribute positively to the financial performance of their strategy. 15% had unclear expectations due to a perceived lack of evidence, while 11% believed ESG integration neither contributed nor took away from financial performance. Only 1% believed ESG integration had a negative effect on financial performance.
The survey found that 76% of managers say they consider climate-related risks and opportunities, while approximately 60% can provide an example of when climate risk factors influenced a buying or selling decision. “It is encouraging that such a high proportion of managers consider climate change in their investment decisions, but this does not always translate concretely in real portfolio decisions. This discrepancy illustrates some of the challenges facing our industry today. But through in-depth due diligence, our research team can build a just and informed opinion on the quality of a manager’s climate change risk integration. The team can also identify managers who are best suited to offer transition-ready portfolios.”
The report noted that 62% of managers have an engagement policy in place. However, while 84% of managers report they have joined the UN PRI, only 29%, 22% and 18% reportedly have joined Climate Action 100+, the UN Global Compact and the UNEP FI. Moreover,t only 28% of managers currently report on the key metrics used to measure and manage climate-related risks and opportunities as recommended by the Task Force on Climate-related Disclosures (“TCFD”). Finally, 52% of managers are already endeavouring to understand and consider adopting the TCFD guidelines in their reporting procedures.
On the topic of diversity, although traditional factors, such as professional experience cognitive ability, and education stood prominently among the priorities of asset managers perceived determinants of success, gender, but particularly age and race appeared to be neglected. The picture is worse when considering what asset managers assess when researching a potential new investment or while monitoring an existing investment. Less than half of asset managers conducted assessments on any given issue. Less than one in five considered issues of racial diversity and less than one in ten bothered to consider sexual or religious diversity.
Focusing on metrics, 77% of managers measure gender diversity, 58% of managers consider it an important factor to their teams’ success, 11% of managers have no female representation on investment teams. However, 60% of managers did not complete gender pay gap reporting in 2019.
“Of the three aspects of diversity highlighted in this report, racial diversity ranked the lowest in terms of its importance to team success across surveyed managers – only 39% of managers selected this option,” the report notes. “Of the managers that measure racial diversity, 13% of the investment teams are 100% white/Caucasian and a further 68% (49+19) of managers are also predominantly white/Caucasian.” Given these facts, it is not surprising that the report finds that 56% of managers do not assess racial diversity within their teams. Of those managers that measure racial diversity, 52% have no black representatives on their investment teams “This data highlights the uncomfortable truth that minority groups are underrepresented in our industry,” the report adds.
“The data makes difficult reading and should make every organisation stop to reflect on what is causing it. Is there a lack of people in the pipeline? Are less diverse firms less appealing to minorities? Does the industry simply reflect disparities that already exist in society? In reality, it is likely to be a complex mix of these factors – and this is a problem for all of us,” the report concludes.