Ethos Foundation along with its Ethos Engagement Pool (EEP) International backed by pension funds managing assets worth around CHF300bn (€313bn), is launching a new campaign to engage with the largest asset managers whose votes on ESG topics are often not in line with the demands of asset owners.
As this year’s annual general meeting (AGM) season starts, Ethos is kicking off its new engagement campaign, the first of its kind in Switzerland, in partnership with the pension fund for the Swiss canton of Geneva (CPEG), and MBS Capital Advice, a company advising pension funds on investment strategies.
“We will engage with the largest, international asset managers – BackRock, State Street and Vanguard. We are also targeting UBS and Pictet asset managers in Switzerland,” Vincent Kaufmann, chief executive officer of Ethos Foundation, told IPE.
The campaign is a first step to induce asset managers to vote considering ESG criteria at AGMs, and to make asset managers aware that pension funds want more consistency between how they vote and what is asked through engagement activities.
“This will [also] make pension funds [better] informed on how their asset managers are potentially taking their interest into consideration, or not. Some pension funds might look at to what extent stewardship activities are taken seriously by asset managers, in accordance with the values of the pension funds, taking it into consideration when tendering or re-tendering mandates,” Kaufmann said.
Ethos, CPEG, and MBS Capital Advice will start with the seven largest asset managers because they manage the largest share of pension fund assets, Ethos said, noting that the support for shareholder resolutions aimed at tackling social and environmental issues hit a new low last year, driven by large US asset managers.
The scope of the engagement campaign could be expanded in the future, Kaufmann said.
Ethos will send a letter to asset managers to communicate that their clients are increasingly sensitive on how they vote.
“We have identified 20 AGMs so far, but the number might increase looking at how things evolve, depending on which shareholders’ resolutions will be up for a vote or not,” the CEO added.
Pension funds this year will use both direct engagement and engagement through the new campaign launched by Ethos and CPGE to exercise pressure on asset managers.
CPEG, which is actively helping on the campaign efforts, insisted on the backing of the EEPO International as it represents a large amount of assets to have more leverage on asset managers.
“Exercising voting rights is an important tool for expressing shareholders’ expectations and demanding companies to be accountable for key sustainability issues,” said Grégoire Haenni, the head of CPEG’s investment department.
The misalignment of voting decisions of asset managers with the priorities set by EEP International members in the shareholder dialogue weakens the impact that investors can have collectively on managers, and undermines the credibility of engagement activities, according to Ethos.
“Climate change, and the climate strategies of companies, remain a very important topic,” Kaufmann said, adding that social and governance issues will be on the agenda, too.
For example, Ethos intended to ask BP to re-submit its climate strategy after the company’s CEO, Murray Auchincloss, announced a company reset to focus on long-term shareholder value, meaning it would boost investments in oil and gas, and move away from its green investment plan.
BP won’t put its new climate strategy to a vote despite stepping back from its green investment plan.
“We will therefore flag the reelection of the chair as a potential item to challenge,” Kaufmann said.
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