Stockholm (NordSIP) – Signs of a widening gap on sustainability matters between asset owners and managers are evident in new analysis published today, 26 March 2025. The Global Responsible Investment Trends report is based on analysis of the responses of 3,048 signatories in the Principles for Responsible Investment’s (PRI) latest annual reporting cycle, representing combined assets of almost $90 trillion.
The PRI has taken a relatively upbeat tone in presenting its new report, with CEO David Atkins commenting: “Our data shows that the perception of an industry-wide shift away from responsible investment practices is overstated. The global sector fundamentally understands that core responsible investment principles help them make smart investment decisions and are good for their businesses. What we are seeing is that signatories are going back to basics, assessing their work and evolving it in line with the world around them.” However, while investors broadly continue to integrate environmental or social factors that they consider material into their investment decisions, there appears to have been a shift in emphasis when it comes to engagement and shareholder activism.
European asset owners losing faith in US managers
Asset management firms’ retreat from collaborative engagement initiative over the last year has been well documented, and the trend is reflected in the PRI data. Almost half of the asset owners prioritise collaborative engagement, as opposed to only 19% of the investment managers. A greater proportion of asset owners also take a long-term approach to climate investing, using scenario analysis to steer their portfolios towards pathways compliant with the Paris agreement. Asset managers also appear to be more reluctant to use public engagement as a stewardship escalation tool for portfolio companies.
This gradual retreat by asset managers from previously accepted sustainability and ESG-related practices appears to have heightened the need for asset owners to enhance their selection and monitoring procedures. This is evident in year-on-year increases in the number of PRI signatories evaluating managers’ proxy voting guidelines and track records before considering appointing them. There is also greater ongoing scrutiny of managers’ integration of ESG factors in their processes, with formal escalation measures being agreed in almost all cases. Asset managers are no longer given the benefit of the doubt, with their clients increasingly incorporating detailed responsible investing expectations within contracts.
A large part of the growing gap between asset managers and institutional asset owners can be attributed to US firms. The PRI data confirms the recent trend for greater scrutiny of proxy voting practices, with many found to be increasingly disconnected from the goals and wishes of the ultimate asset owners. US managers have begun to lose large European institutional mandates as a result. It is unclear how they will be able to manage the balancing act between US and European expectations.
Among the more positive revelations in the PRI data is a continued improvement in sustainability standards within private markets. This is driven by increased allocations to these asset classes by sustainability-minded institutions, who are building ESG requirements into due diligence process and contracts. The PRI report shows evidence of real asset investors consistently using ESG-related performance indicators and developing 100-day actions plans to improve environmental and social standards across their portfolio holdings.
Image courtesy of Tung Lam / Openclipart Vectors from Pixabay
Stockholm (NordSIP) – Signs of a widening gap on sustainability matters between asset owners and managers are evident in new analysis published today, 26 March 2025. The Global Responsible Investment Trends report is based on analysis of the responses of 3,048 signatories in the Principles for Responsible Investment’s (PRI) latest annual reporting cycle, representing combined assets of almost $90 trillion.
The PRI has taken a relatively upbeat tone in presenting its new report, with CEO David Atkins commenting: “Our data shows that the perception of an industry-wide shift away from responsible investment practices is overstated. The global sector fundamentally understands that core responsible investment principles help them make smart investment decisions and are good for their businesses. What we are seeing is that signatories are going back to basics, assessing their work and evolving it in line with the world around them.” However, while investors broadly continue to integrate environmental or social factors that they consider material into their investment decisions, there appears to have been a shift in emphasis when it comes to engagement and shareholder activism.
European asset owners losing faith in US managers
Asset management firms’ retreat from collaborative engagement initiative over the last year has been well documented, and the trend is reflected in the PRI data. Almost half of the asset owners prioritise collaborative engagement, as opposed to only 19% of the investment managers. A greater proportion of asset owners also take a long-term approach to climate investing, using scenario analysis to steer their portfolios towards pathways compliant with the Paris agreement. Asset managers also appear to be more reluctant to use public engagement as a stewardship escalation tool for portfolio companies.
This gradual retreat by asset managers from previously accepted sustainability and ESG-related practices appears to have heightened the need for asset owners to enhance their selection and monitoring procedures. This is evident in year-on-year increases in the number of PRI signatories evaluating managers’ proxy voting guidelines and track records before considering appointing them. There is also greater ongoing scrutiny of managers’ integration of ESG factors in their processes, with formal escalation measures being agreed in almost all cases. Asset managers are no longer given the benefit of the doubt, with their clients increasingly incorporating detailed responsible investing expectations within contracts.
A large part of the growing gap between asset managers and institutional asset owners can be attributed to US firms. The PRI data confirms the recent trend for greater scrutiny of proxy voting practices, with many found to be increasingly disconnected from the goals and wishes of the ultimate asset owners. US managers have begun to lose large European institutional mandates as a result. It is unclear how they will be able to manage the balancing act between US and European expectations.
Among the more positive revelations in the PRI data is a continued improvement in sustainability standards within private markets. This is driven by increased allocations to these asset classes by sustainability-minded institutions, who are building ESG requirements into due diligence process and contracts. The PRI report shows evidence of real asset investors consistently using ESG-related performance indicators and developing 100-day actions plans to improve environmental and social standards across their portfolio holdings.
Image courtesy of Tung Lam / Openclipart Vectors from Pixabay
