‘Degree of humility’ needed in claiming engagement impacts

UBS AM's head of thematic engagement discusses the difficulty of attributing impact and his experiences with CA100+.

Investors need to ensure they have a “degree of humility” when claiming to be the cause of engagement outcomes, according to the head of thematic engagement at UBS Asset Management.

Speaking to Responsible Investor, Francis Condon said: “We communicate the view of UBS Asset Management and the funds we represent with the companies we’re investing in, and establish a relationship with a company.

“Sometimes it’s the combined voices or it’s the loudness of the voice or the number of voices that management listen to,” he said.

“I’m not sure that any manager can explicitly say their actions resulted in [something] but I think what we can all do is point to change and identify a contribution. It’s the difference between causation and correlation.”

He added that “we all have to have a degree of humility about it”.

As stewardship techniques become more advanced, investors, and especially asset owners, are beginning to look more at engagement results than volume.

In September last year, the UK’s Financial Reporting Council said it would give greater weight to engagement outcomes when considering applications to the Stewardship Code, shifting away from a focus on policies.

Earlier this year, one UK asset owner said that while managers were often able to provide case studies of engagement outcomes, this was not being systematically tracked.

Climate Action contribution

UBS Asset Management is a major contributor to engagements under the banner of Climate Action 100+. Condon would not be drawn on exact numbers, but the manager leads or co-leads on engagements with between five and 10 companies.

Condon was particularly positive about the initiative’s benchmark, which he said companies are often keen to discuss.

That said, when the firm decides to escalate by voting against management or filing resolutions, “we go public”.

“When we get to the AGM statements and filings, that’s the moment we would step out into the public domain,” he said.

While filing resolutions has not been a major feature in engagement campaigns thus far, Condon said UBS was “always looking at what we can do to achieve successful engagements”.

CA100+ has come under increasing scrutiny from both sides of the political aisle, with green critics saying it doesn’t do enough to push companies on climate, and Republican efforts to undermine it on a legal basis by raising questions over antitrust laws. The initiative says it acts within all relevant regulations.

Condon said that increasing scrutiny of the group was a “natural progression”, given its development and maturity. At ABN Amro, he was involved in implementing the Equator Principles for banks when they first came out.

“I saw how the need for communication, transparency and accountability increased after the initial launch. I see some similarities with the trajectory of CA100+,” he added. However, the launch of the initiative’s second phase earlier this year is a good response to the scrutiny, he said.