Will 2023 see the acceleration of ‘engagement washing’?
High-profile coalitions such as Nature Action 100+ have been launched in recent months, but some are concerned that engagement is becoming a ‘fig leaf’ to excuse investments in companies facing too high barriers to exit, reported Siri Christiansen on CityWire in December 2022.
The latest Climate Action 100+ benchmark assessment from October 2022 shows only 20% of focus companies have set Paris-aligned medium-term emission reduction targets that cover all material scopes, and just 10% of focus companies have committed to aligning their capex plans with their greenhouse gas targets or the Paris Agreement.
“Either engagement doesn’t work, or it isn’t done properly. Tea-and-cookies chat instead of forceful demands. The investment still needs to generate cutting-edge returns, after all”, former ShareAction financial sector strategies director Wolfgang Kuhn, wrote in an opinion piece earlier this year.
Andrew Parry, head of investments at J O Hambro Capital Management, said there is ‘undoubtedly’ a quantity issue in engagement as asset managers aim to present large numbers of corporate engagements and stewardship coalitions. “The typical large asset manager is signed up to around 24 initiatives. Now, some of these initiatives are really quite seismic in their scope. To manage that either requires an army of people, or you’re just putting your name to a paper so that you can use it as a nice bit of glossy marketing”, said Parry. “You find out that it’s a lot of superficial letter writing, whereas you really need to have long conversations and follow-ups”, Parry added. “Coalitions like Climate Action 100+ can, occasionally, become a ‘fig leaf’ and provide asset managers with an excuse to maintain exposure to hard-to-abate sectors”.