Asset owners to engage managers on sustainability governance structures

The World Benchmarking Alliance (WBA) is set to convene asset owners, civil society organisations and governance experts to develop a series of asks around the governance structures asset managers should have in place for sustainability, Responsible Investor can reveal. 

According to WBA’s financial system transformation lead, Andrea Webster, the asks will likely relate to levels of accountability and knowledge on sustainability at board level, how boards incentivise sustainability, and how managers prioritise board-level sustainability.

Webster said the focus on governance was prompted by shifts in the external environment.

“Any asks of asset owners to asset managers in this current environment have to be achievable and able to be actioned while navigating a very polarised landscape, and we see governance as being the one that can be focused on,” she said.

“Asset managers are having to answer some very difficult questions both internally and externally from stakeholders with often contradictory requests. In many instances the answers are nuanced, there are trade-offs, which need good governance and board-level direction.

“We think if we can champion the right governance structures, then there is so much that can springboard off it, such as direction on group-level policies, strategic focus and ultimately system-level change of global issues.”

Currently, WBA is identifying and reaching out to asset owners across jurisdictions, as well as other organisations that can bring expertise and different stakeholder voices.

Webster added that the alliance is also interested in involving asset managers that already demonstrate best practice on governance in the shaping of the blueprint and the asks.

“We are keen for managers that have strengthened their board-level oversight to share their experience, and what were the key elements and hurdles they faced and overcame. We want buy-in and value to the ask to make it meaningful to all.”

Webster expects work on the project to start later this year. This will begin with the group developing a “pragmatic blueprint” of what good governance structures on sustainability look like, and then developing the specific asks. 

Once the asks are created, Webster said the asset owners will engage their managers on them and explain what they need to do to meet them. She added that the group will also engage other asset owner initiatives. “We want to focus on positive action that dovetails with other key industry initiatives.”

WBA’s work comes as asset owners are increasingly vocalising their frustration with manager stewardship and voting on ESG issues. Last month, RI dug into what lies behind the complaints, and what the UK’s pension funds are doing to hold their managers accountable and take back control over voting.