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ESG improvements, but ‘striking’ disparity between best and worst UK managers: FairPensions

Environmental and social take up lags major governance improvements.

Fund managers operating in the UK have improved their response to the integration of environmental, social and governance (ESG) issues, although striking disparities exist between the best and worst, according to the 2008 annual Investor Responsibility survey by FairPensions, the UK lobby group. The top five scoring RI managers in order were F&C, Insight, Hermes, Aviva and Standard Life, all of whom FairPensions said demonstrated deep commitment to ESG integration in investment. The bottom five, starting with the poorest ESG performer, were Credit Suisse, Artemis, Scottish Widows, State Street and Goldman Sachs. FairPensions said bottom of the table managers often gave no indication of any coherent approach to ESG and some failed to meet industry best practices such as the UK combined code on corporate governance. The pensions lobby group singled out Edinburgh-based fund managers Baillie Gifford and Standard Life as having shown major improvements in ESG policy over the year. It also noted significant achievements by Goldman Sachs, Wellington and Blackrock, who all figured in last year’s bottom five. The total number of managers surveyed was up from 20 in 2007 to 30 in 2008. No manager scored a zero for ESG integration this year, as opposed to two last year. Overall, the survey showed that the 20 managers surveyed in 2007 had improved their tallies against the responsibility score chart by 23% in 2008. This year’s survey, titled: “UK fund managers’ performance and accountability on extra financial risks” showed, however,that responses to governance issues still far outweigh those of the environment and social concerns. FairPensions said this was a “significant cause for concern” adding that both could be as damaging to corporate value as governance issues in the short and long term. It said only F&C, Insight and Standard Life could explain their environmental policy in any detail. The lobby group said it was also concerned that a fifth of the asset managers surveyed said they had no policy on ESG issues. In addition, the survey found that less than a third of managers fully declared how they voted during the last year at corporate annual general meetings, although it noted that 22 out of 30 did make limited website disclosures. The survey revealed the growing role of corporate engagement with eight managers saying they had at least 50 meetings over the year with companies to exclusively discuss ESG issues. Nonetheless, it said only the top few managers showed evidence of company change as a result of engagement through benchmarking exercises or external verification.
FairPensions attributed the growing awareness of ESG integration to the initiatives including the United Nations Principles for Responsible Investment (UNPRI), which it said had catalysed asset owners to start making these explicit in investment mandates: “Rising RI expectations amongst asset owners, especially pension funds, suggests that ignoring ESG issues will become increasingly ill-advised from a commercial perspective for the UK’s leading asset managers.” Link to FairPensions

See downloads (left column) for UK ESG fund manager table