The world’s six largest asset managers are among the poorest performers on human rights

19 May, 2020 02:02
source: Singularity Financial

Singularity Financial Hong Kong May 18, 2020 – by David Lee

ShareAction, a campaigning organisation pushing for global responsible investment system, recently conducted “Asset Owners Disclosure Project (AODP)”. Despite asset managers often touting their responsible investment credentials, the industry as a whole has a long way to go.

ShareAction selected 75 of the world’s largest asset managers for this study. The assessment scope was determined based on the IPE’s 2018 Top 400 Asset Managers list, however this was balanced against regional concentration to ensure inclusion of the 20 largest US and 40 largest European asset managers, with 15 from other regions. The assessment is based on direct disclosures (69 asset managers) and public disclosures (6 asset managers) released no later than October 2019.

According to ADOP’s finding, the world’s largest asset managers show particularly poor ESG performance. In fact, all of the world’s six largest managers sit in the D and E rating band. Together they have a combined AUM of over US$20 trillion – representing a third of the total AUM of the managers assessed as part of this report.

The majority of asset managers do not have board-level oversight, or financial incentives, for responsible investment

Robust governance is vital for tackling ESG risks, such as climate change, and responsible investment should be seen as a business priority. As a barometer of this, ShareAction examined asset managers on whether (1) accountability of responsible investment sits at the highest level – with the board; (2) whether this is backed up by financial incentives; and (3) whether this is supported with comprehensive training.

For asset managers falling behind on these areas, ESG could become an ad-hoc exercise – leaving portfolios vulnerable.

Given that boards are accountable for the long-term value of the business, it is disappointing to see just 21 per cent of asset managers have board-level oversight for responsible investment, and almost half having a responsible investment team as the highest level of oversight of this issue.

Meanwhile just five (7 per cent) of the asset managers reported having financial incentives linked to responsible investment – with 59 per cent reporting no incentives at all. With four out of five of the companies offering financial incentives sitting in the A rating, it is clear that financial incentives are a key driver motivating performance on responsible investment.

On top of this, over half of those surveyed offer no or ad-hoc training to staff on responsible investment, with just three (4 per cent) of managers offering comprehensive training. Those managers that do not offer training perform poorly compared to those that do with the leaders having introduced structured mandatory training on responsible investment themes for all investment staff, with strong training and knowledge sharing at the board level.

The world’s largest asset managers pay lip service to preventing human rights abuse

ShareAction has found that while a large majority of the world’s largest asset managers say they aim to tackle human rights issues, very few take meaningful action (through proxy voting, exclusions, engagement, or adherence to international frameworks) to mitigate human rights abuses like modern slavery and harm done by controversial weapons.

47% of asset managers, with over $45 trillion in assets in total, do not prohibit investments in controversial weapons banned by international arms treaties.

70% of the world’s largest asset managers do not have a policy to exclude or engage with companies in line with international human rights frameworks.

US asset managers lag behind global peers on human rights approaches, with leaders all based in Europe.

The world’s six largest asset managers are among the poorest performers on human rights, including Fidelity Investments (FMR), J.P. Morgan Asset Management, Vanguard, BlackRock State Street Global Advisors, and Capital Group.