I recently had the opportunity to chair a discussion on Zoom about the evolving way asset managers in Europe are communicating around their plans and ambitions in sustainability. Several dozen people gathered to hear from leading asset management communicators and an editor on an area that has seldom been off the front page of the financial and business press this year.
We convened the discussion on the back of a piece of Cognito-derived research that found overall coverage on topics relating to sustainability doubling year-on-year, and with a gap between the stories pushed by individual firms and what’s reported on the industry. But neither the data nor the discussion showed irrevocable differences between the press and asset managers, rather it highlighted the need for continuous conversation around the evolving investment landscape.
A concept that flowed through the discussion was the concept of stewardship.
Just this week Goldman Sachs Asset Management announced the appointment of its first ever head of stewardship in the EMEA region, who will handle proxy voting and direct engagement with companies in their portfolio. The move is just a single data point in a larger pattern – asset managers devoting additional resource to handling how the company’s investments perform in terms of climate and other sustainability metrics.
I want to draw a distinction here between the narrowly defined job title of stewardship and the broader application of the term. Several companies, including Federated Hermes who we had on our panel, offer dedicated stewardship services. These services allow institutional investors to be more active owners of assets through the creation of additional measures and conversations around ESG issues. On the accountability end Morningstar, the investment research firm, has issued a stewardship grade to assess the quality of a company's governance practices in both fund and stock reports for the last 15 years.
Pension funds and other institutional investments have struggled to speak at a volume consummate to their power and influence over the companies they invest in. This is changing rapidly – through a combination of greater understanding about the toolkit available to investors, more coordination and pressure from ground-level constituencies. This means more people can take on a stewardship role, using digital organization tools and grassroots organizing.
A high profile example of this type of action was seen just a couple weeks ago, when a series of shareholders forced the world’s largest energy company – ExxonMobil – to place three new people on their board of directors. These new directors will be charged with ensuring the company moves on a more accelerated timeline towards a green transition. Their success is due to a collaboration between non-governmental organizations, a group of large American pension funds and a coordinated communications campaign. It’s been widely seen as a view into the future battleground for the shape and pace of corporate sustainable behaviour.
There’s been a parallel rise of groups and organizations made up of asset managers designed to impact policy and behavior. One of the most important of these is the so-called ‘alliance of alliances’ that is the Glasgow Financial Alliance for Net Zero announced on Earth Day. This is a collection of banks, asset managers and owners, insurers with collectively more than $70 trillion in assets under management. Their goal is to accelerate the planet’s ‘net carbon zero date’ to before 2050.
The takeaway for other companies is clear – we are reaching a point where proxy votes and other tools can have meaningful impacts on business strategy. These can frequently be collaborations between formal shareholders (and people who take positions in the company specifically to drive policy) and other societal actors who can influence those people. Governments also have a role to play, as regulatory and legal action is another level to impact behavior through mandates.
Sitting underneath this is an increasing importance of the communications team. This may seem self-serving – after all I work at a communications agency and everyone in our conversation works in marcomms in some capacity – but this is a space where perception is more vital than ever. A sense of executive indifference can spread like a tumor once a narrative about a company takes root in an influential member of the public.
This is not to say that the right core message can serve as an impenetrable shield against criticism. Rather, communications officers need to be able to synthesize and effectively distribute defined projects against metrics. Poorly sourced or ‘thin’ seeming campaigns are easily labelled as ‘greenwashing’. While sometimes there is more action than puffery, other times the real failure is one of clear communications. This requires staying abreast of what organizations, certifications and accreditations are gaining traction with valuable stakeholders. This is a space that is constant flux, which means concrete recommendations may not be possible across a long period of time.
Cognito’s recent research project found coverage around ESG soaring, with journalists primarily interested in telling stories about the industry at large rather than a single company. Opportunities abound for smart executives and teams to participate and drive these conversations, although only if people understand the industry’s direction of travel.
Jon Schubin is a director in the London office