A coalition of asset owners managing over $1.5 trillion in assets has unveiled a new set of guidelines to improve alignment between asset owners and managers on climate stewardship. The initiative includes major institutional investors from the UK, Europe, the US, and Australia, such as Scottish Widows, Phoenix, Aegon, Nest, and Australian Ethical Investment.
A Clearer Path Forward for Managers
The guidelines, which have been several years in development, are designed to provide asset managers with clear expectations on how to approach climate-related stewardship. The coalition advocates for managers to prioritize industry collaboration, engage with public policy, and adopt a structured voting approach based on a robust theory of change.
This move comes at a critical juncture, following BlackRock’s recent exit from the Net Zero Asset Managers initiative and the subsequent suspension of the alliance’s activities. Asset manager stewardship has been under increasing scrutiny, with several large oil and gas companies backtracking on climate commitments, leaving asset owners frustrated by the lack of alignment with their climate goals.
Key Objectives: Empowerment and Accountability
Leanne Clements, Head of Responsible Investment at The People’s Partnership, who led the development of the guidelines, noted the importance of providing managers with “clarity on long-term expectations” while also empowering stewardship teams to act. The guidelines aim not to micromanage but to ensure that asset owners and managers are on the same page when it comes to climate objectives.
However, the statement acknowledges the need for pragmatism in some cases, especially with managers like BlackRock, which continue to hold significant influence in major companies despite stepping back from climate alliances. As Shipra Gupta, Investment Stewardship Lead at Scottish Widows, pointed out, it’s crucial for managers to demonstrate how they are using their influence responsibly, even if they leave certain climate initiatives.
Escalation Mechanisms for Misaligned Stewardship
The guidelines also introduce escalation mechanisms to address situations where managers fail to meet the expectations set by asset owners. These mechanisms include reassessing asset manager ratings, revising mandates, or potentially selecting managers more aligned with the asset owners’ climate objectives. The People’s Pension, for instance, has made it clear that it would consider divesting from managers if insufficient progress is made.
While the guidelines emphasize dialogue and collaboration, they also recognize the need for accountability. As Clements highlighted, “Stewardship isn’t just about setting expectations; it’s about ensuring managers are held accountable.”
Looking Ahead: Strengthening Long-Term Stewardship
The publication of these guidelines is seen as a significant step in aligning asset owners and managers on climate action. However, with challenges ahead—such as the changing political and regulatory landscape—asset owners are determined to ensure that their investments support the global transition to a sustainable, low-carbon future.
As the coalition works toward fostering greater accountability and alignment, the hope is that clearer expectations and robust engagement will lead to more consistent and impactful climate stewardship across the investment industry.
ECO Sustainability Picture by Stockcake
