Representatives from USS, Wellington, Credit Suisse and MSCI are among the members of a new Principles for Responsible Investment (PRI) working group tasked with advising on a stewardship programme, Responsible Investor can reveal.
In December, the Thinking Ahead Institute (TAI) was commissioned by the PRI to research and assess the appropriate level of resources that institutional investors should be prepared to dedicate to stewardship within their organisations.
Established in 2015, the TAI is a not-for-profit investment research and innovation member group of more than 55 institutional asset owners and service providers.
Marisa Hall, head of the TAI, told Responsible Investor: “We believe that a new investment model is emerging in which stewardship is a much bigger element and this requires new thinking and action on resources, coalitions, methods and motivations.”
She continued: “Our work with PRI is two-fold – to explore how much investors devote in these areas of stewardship given their context, but to also set out a vision on the appropriate size and shape of stewardship strategies, with the aim of producing instrumental impact.”
To support the TAI, the PRI has created a working group of asset owners, asset managers, and service and data providers of varying sizes and geographies.
In total, the group comprises 23 individuals, including representatives from Columbia Threadneedle Investments, HSBC Bank (UK) Pensions Trust, Sustainalytics, Cardano and UBS Asset Management.
Will Martindale, co-head of sustainability at Cardano and a member of the working group, told RI: “Effective stewardship on sustainability issues is hard to measure. Most investors set out their stewardship principles, the number of their engagements, their votes for and against sustainability issues at company AGMs, and an explanation of their approach.
“But assessments are not straightforward and attribution is challenging. That said, for responsible investors, stewardship is arguably our most important tool in meeting our sustainability objectives.”
Echoing this, David Russell, head of responsible investment at USS, told RI: “The Resourcing Stewardship working group will help us understand what to expect from our investment managers and will enable us to engage with them on areas of underresourcing or underperformance. This will be more than just the number of people in responsible investment teams – it will also include the experience and training of those teams and how stewardship and engagement is embedded across the wider business.”
The group will provide guidance on the areas within stewardship for the TAI to explore through a planned global institutional benchmarking survey.
The survey – which will be open to working group members, TAI members and PRI signatories – will look at areas such as the number of full-time employees devoted to stewardship work, how stewardship is applied to different asset classes and spend on stewardship as a proportion of front-line expenses.
TAI’s work will culminate in a report, which will explore current stewardship practices and resourcing, and include examples of stewardship best practice by investment organisations.
Hall said: “Based on our work with the working group – as well as input from other practitioners and academic research – we will set out recommendations on the level of resources different types of investors should be prepared to dedicate at an entity and systems level to drive change.”
The TAI plans to provide a calculation methodology to estimate the appropriate levels of resources that different types of investors should be prepared to dedicate to both direct and market stewardship activities in order to have a real-world impact.
“Context is important and so the work will consider organisational profiles based on their beliefs and approaches to stewardship as an input to our guidance on resources allocated,” said Hall.
“It’s the rightsizing of the stewardship which matters, so that stewardship resources are being used efficiently and in a collaborative way and are tied into the vision and capabilities of the organisation.”