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
expectations - 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?
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About the Author
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.