EMERGING THEMES
Expanding our thinking
It is fair to say that, in general, manager responses on emerging themes were disappointing. The issues mentioned by large numbers are very far from emerging – or if they genuinely are new for these managers, those firms can only be emerging from the stone age.
While social issues are starting to appear in the responses to our survey, this is from a very low level and covers a wide dispersion of issues.
The one ubiquitous focus for fund managers in this area is on forced labour or modern slavery, with 92% of managers saying they either have or are in the process of developing a statement on the issue.
Disclosing basic data on human rights, like the percentage of investments in companies with no human rights policies and in companies with severe human rights violations, seem to be what constitutes ‘leading’ practice. It doesn’t seem particularly cynical to connect this to the Sustainable Financial Disclosure Regulation (SFDR) disclosures that all fund managers selling funds into Europe are having to make in 2023 – where these questions are part of the voluntary indicator set.
It is safe to say that, for now, there is an ambition gap between many leading asset owners and their fund managers on what, if anything, to do about social issues.
Almost half of respondents said they had a nature-related statement or considered impacts on biodiversity as a firm. However, the progress this implies has not been borne out in Redington’s own manager searches for nature-based solutions. Having conducted an extensive search over two years, culminating recently, we found too many managers had wafer-thin substance in their nature statements. That and the infancy of nature metrics – let alone their integration in the investment and stewardship process – lead us to believe that much work is still to be done in this area.
Firms that have actually launched investment strategies in this sphere are, unsurprisingly, the ones with the most thought-through approaches.
The next step for many asset owners – particularly those who have set net zero ambitions and done a few rounds of disclosures on their climate risk – is to assess their impacts and dependencies on natural ecosystems. At the very least, fund managers must step up and provide this information to their clients.
