Most asset managers have withheld or ditched investments as part of ESG engagement, says study

More than half of asset managers claim to have “taken actions” to exit, reduce or withhold investments in companies as part of their responsible investment engagement activities, according to a survey from campaign group ShareAction.

The biannual study, the results of which are being published in phases (IPE covered the initial findings here), assessed 77 of the biggest or most regionally influential investors globally on their approach to sustainable finance.

“Over half (56%) reported they had taken one of four divestment-related actions as part of an engagement process,” said the report. The actions included divesting completely from an entity, reducing debt or equity holdings and refusing to purchase new debt.

Almost three quarters (74%) of European asset managers said they had taken a divestment-related action, compared with 40% in the Americas and 31% in the Asia Pacific region. Managers were “relatively evenly spread” with regard to which of the four approaches they took.

ShareAction urged assets managers to develop and publish their escalation strategies for dealing with uncooperative companies, including what penalties would be introduced and what would trigger those penalties.

Public statements, shareholder resolutions, votes against management and divestment are all legitimate forms of escalation by investors, it added.

Of the 77 managers assessed, 83% said they had escalation steps in their engagement policies, according to the study, but most don’t include consequences or explicit triggers for escalation.

“These steps are important to ensure that engagement does not become a cycle in which no real-world impacts are achieved,” said the report’s authors.

They highlighted Swedbank Robur’s approach as best practice, alongside Robeco. The former – the €115bn asset management arm of Swedbank – gives companies no more than two years to make sufficient progress on engagement topics, after which point it said it would divest.

When it came to voting at companies annual general meetings (AGMs), 88% of asset managers in the study were found to publicly disclose their voting decisions after the event, but just three did so consistently before the AGM.

The three were AllianceBernstein, Aviva Investors and Legal & General Investment Management, although ShareAction noted that others have followed suit since the assessment was conducted, including Schroders.

“Pre-declaring voting intentions on contentious or high-profile resolutions is a strong public signal that they are legitimate and important,” said ShareAction, adding that it can also encourage companies to commit to change without needing the vote.

Last year, investors including Candriam, Actiam and Greater Manchester Pension Fund came out in support of a proposal that was planned at food giant Unilever, asking it to report on the healthiness of its products. Unilever subsequently agreed to the requests ahead of the vote.

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