Enhancing effectiveness in stewardship and engagement

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WHEB white paper
At the end of October, UK SfC member WHEB Asset Management issued a White Paper outlining the urgency for industry consensus on stewardship and engagement definitions and practices.

 

The White Paper, entitled “From Obstacles to Outcomes: Enhancing effectiveness in stewardship and engagement”, aims to promote industry dialogue on the inefficiencies of shareholder engagement within the ‘stewardship ecosystem’, which includes asset owners, asset managers, creditors, companies, regulators, investment consultants, advisors and service providers.

Rachael Monteiro, Stewardship & Climate Analyst at WHEB, says: “‘More activity’ appears to have become the dominant narrative in investor stewardship and engagement in recent years. In our view, this misses the point. Instead, the focus should be on ‘more effective’ stewardship and engagement that fulfils its purpose in delivering long-term value for clients. The stewardship and engagement industry is at a critical juncture. Fiduciary duty, client demand and now regulatory requirements are creating real appetite for more effective engagement. The industry needs to tackle three key barriers if its potential is to be realised.”

These three key barriers the industry needs to overcome are:

  • Reaching consensus on key definitions, such as what an ‘engagement’ actually is and how effectiveness should be measured;
  • Focusing on engagement effectiveness in achieving clear objectives and not just levels of activity;
  • Better reporting and communication of the outcomes achieved, evidencing how a specific investor contributes to an outcome and how this delivers value for clients.

Seb Beloe, Partner and Head of Research at WHEB, added: “We see these obstacles not as existential threats, but as growing pains symbolic of the rapid development in stewardship and engagement practices. Good practices developed by WHEB and other practitioners are outlined in the paper. These offer potential solutions to strengthen the role asset owners, managers and other practitioners can play in helping to accelerate the delivery of a zero-carbon and more sustainable global economy.”

A good example on how the outcomes are measured and communicated can be found on page 18, where the outcomes of WHEB engagement on its portfolio emissions are measured (see picture). This will be a source of inspiration for SfC’s own engagement report.

Find out more: ‘Engagement-Washing’ within ESG Funds a Result of Industry Confusion – WHEB Asset Management White Paper.