Asset Owners as Stewards of Capital

Katie Simm

This article was originally published as part of our Alpha Outlook 2021

With upcoming ESG regulatory challenges starting to directly impact asset owners and numbers of asset owner voluntary code signatories continuing to rise, the focus on providing good stewardship is increasingly under the spotlight. Asset owner demand is driving the wave of ESG transformation in the wider industry, and with it the need for clarity and accountability between key links in the investment chain.

Asset owners & asset managers: a chain reaction

Following the mainstream rise of ESG & RI, asset owners are making strides to ensure that responsible investment principles are a key consideration in their strategies on behalf of beneficiaries. While ESG policies are now a common feature within the asset owner playbook, acting on the principles set out in these policies and holding managers to account is becoming increasingly important.

What does it mean to be a good steward?

  • Know your beneficiaries: supporting beneficiary requirements starts with knowing what they want. Asset owners must engage their beneficiary base on ESG considerations to understand their responsible investment
  • Have a clear strategy & set your boundaries: many asset owners now have documentation outlining their ESG policy, but translating this into operational processes must go further. Embedding principles in key procedures such as manager selection, gap analysis between owner and manager policies and on-going monitoring are crucial to support responsibl investment progress and accountability
    Proactive stewardship: it is no longer enough to review ESG application on appointment of a manager and trust that their policies and processes will do the rest. Proactive oversight, clear engagement with asset managers and
    holding them to account is becoming a beneficiary expectation
  • Beneficiary engagement: keeping beneficiaries informed is key; campaigns such as Make My Money Matter have increased the mainstream awareness of knowing where underlying funds are going, and the new wave of customer is aware of the considerable pressure they can apply
  • Plan for the long term: non-financial risks are material to your beneficiaries over the lifetime of their investments, e.g. climate transition risk, and you need to ensure this is embedded in your process

To enable the level of stewardship customers are increasingly expecting to receive, the call to action for asset owners is clear; it’s on you to understand your responsible investment profile to meet the expectations of your beneficiaries. With significant work required to support this, how are you going to set clear expectations for your managers whilst holding yourselves and your managers accountable?

For more on ESG & Responsible Investing, please get in touch.

About the Author

Katie Simm_Alpha FMC
Katie Simm
Senior Manager

Katie is a Senior Manager with a focus on technology implementation, ESG & Responsible Investing and programme delivery services. Since joining Alpha in 2018, Katie has led a number of implementation programmes with large asset managers, including helping to define investment operating models and the consolidation of investment platforms. Before joining Alpha, Katie worked as a Big 4 consultant specialising in Financial Services & Programme Leadership.