Responsible Investor

planned programmes of dialogue and relationship that are implied by the concept of active ownership. Voting in a vacuum is unlikely to deliver results. One test of whether asset managers are effective at implementing active ownership is whether they are willing to meet companies to express their concerns about ESG issues and request specific changes to corporate practice. The asset managers with the greatest commitment to active ownership hold over 100 meetings each year with company directors and other senior managers specifically to discuss ESG concerns (see chart in downloads). At these meetings, and by other means, these managers make hundreds of specific requests for modifications to governance arrangements, environmental disclosures and other aspects of company ESG management. Furthermore, many companies appear to be quite willing to accede to at least some of these requests from their shareholders.
However, the survey found that as many as half the managers who responded do not have any dedicated meetings with companies to discuss ESG issues.
This is not quite the same as saying that these non-activist managers never talk to companies about ESG issues. Some of these managers report that ESG issues may come up from time to time in routine investment meetings. However, their intent on these occasions is merely to gather information for investment decision-making purposes, not to attempt to influence company behaviour on these issues. One large asset manager gave the example of BP’s poor health and safety record in the US. The manager said that even before BP’s Texas City refinery disaster it had been concerned about the potential financial impact of BP’s poor track record on

this topic, and had asked the company questions. However, the manager said that this information was solely used to inform investment decision-making. At no point did it seek to use its influence as a large shareholder to encourage BP to improve its management of health and safety risks. When I asked why not, the asset manager said that it didn’t see changing corporate behaviour as part of its role. Indeed several large and successful asset management companies covered by the survey were quite explicit in opting not to engage in this kind of activity. As another one put it in their survey response, “we are not engaged in influencing corporate decisions”.

“as many as half the managers who responded do not have any dedicated meetings with companies to discuss ESG issues.”

Unfortunately many of the asset managers that have been most successful at winning equity mandates from pension funds in recent years happen to fall into the non-activist category. This means that pension funds who hope to deliver on their UN PRI active ownership commitments by delegating to their existing equity managers are likely to be disappointed.
It also begs a question about the extent to which these non-activist asset managers are currently meeting the requirements specified by their mandates from pension funds. Several pension funds have told me that they are not very happy with the level of active ownership displayed by their asset managers. However, they have

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