Asset managers are failing asset owners on stewardship
December 1st, 2023
The UK Asset Owner Stewardship Review has found considerable misalignment and misunderstanding on stewardship issues between asset owners and asset managers.
The review is based on findings from the UK Asset Owner Roundtable from asset owners and managers, which including a range of high-profile pension funds and asset managers.
It proposed five potential reasons for misalignment, including cultural misalignment, resource allocation misunderstanding, fiduciary duty conceptualisation and stewardship process disagreement.
Cultural misalignment was based on evidence of differences between UK-based asset owners and non-UK asset managers.
Resource allocation misunderstanding is based on the potential for misunderstanding the importance of stewardship and voting, leading to insufficient resource allocation.
Fiduciary duty conceptualisation considers the misunderstanding of fiduciary duty, particularly in relation to climate change risk management.
Meanwhile, stewardship process disagreement highlights the differing views on the relationship between voting and engagement.
Finally, financial conflicts of interest could arise due to the commercial relationship between asset managers, banks and issuers.
Leanne Clements, head of responsible investment for People’s Partnership, said: “A complete dismantling of failed status quo approaches to stewardship is needed by the fund management industry, with voting escalation not seen as a ‘last resort’ approach used on an exceptions basis, but rather a powerful signal to companies of what investors expect of them.
“A continued lack of industry action will seriously undermine the financial sector’s ability to deliver not only its own net zero commitments, but more importantly, better outcomes for savers.”
Next steps for the UK Asset Owner Roundtable include extending research to cover US asset owners, one-to-one meeting between roundtable members and their investment managers and developing a set of stewardship expectations for asset managers.
Last Updated: 1 December 2023