Towers Watson’s Urwin calls for better ESG mandates

Owners need to show leadership, says respected industry figure

Roger Urwin, the former global head of investment consulting at Towers Watson who now has a thought leadership role at the firm, has called for better environmental, social and governance (ESG) mandates.
Asset owners needed to show leadership to promote “performance with purpose”, he said.
He was speaking at an event organised by campaign group FairPensions. Urwin said he supported the group’s push for greater legal clarity on the role of fiduciary duty. It’s argued that a mis-interpretation of this concept is leading trustees to prioritise short-term investment gains at the expense of sustainable long-term investing.
“Maybe this idea has traction that I’d sign up to,” he said.
Criticism of the investment chain was “spot on”. Urwin said he thought financial agents were the “tail wagging the dog”: “We need to get trustees showing more leadership” in instructing their fund managers.
Trustees don’t look at ESG issues, Urwin said, because they are “very asset rich and time poor, which makes the one-year relative benchmark king”.

Peter Montagnon, Senior Investment Advisor at the Financial Reporting Council watchdog, said it would be easier to encourage trustees to reconsider mandates than to change the law on fiduciary duty.FairPensions’ Christine Berry, the author of the group’s work on fiduciary duty, agreed that the two approaches were not mutually exclusive.
Urwin’s comments on the role of the contracts between asset owners and fund managers coincides with the International Corporate Governance Network’s launch of its model mandate initiative. “I do welcome trustees drawing up their mandates much more differently,” Urwin said.
Urwin’s comments reflect ideas expressed in his ‘Allocations to Sustainable Investing’ paper of 2010 in which he said sustainable investing is “solid granite finance”.
Berry said fiduciary duty is a “set of blinkers” that is being used as an excuse for inaction. Clarity on the term would not impose change but remove barriers to it.
Saker Nusseibeh, the acting CEO of Hermes Fund Managers, warmly backs the project and thinks it could help “change the way we look at investment”. He argues the entire investment chain is “completely irrational” and that the role of investment has been forgotten.
Penny Shepherd, CEO of UKSIF, the sustainable investment and finance association, who didn’t sign the group’s recent letter to the Times, argued there’s no need for clarity on fiduciary duty because it already exists in common law.