Positive dialogue at the ‘Aligning expectations’ roundtable

‘Aligning expectations’ roundtable paves way for further dialogue on impactful climate stewardship between asset owners and asset managers

The Asset Manager-Asset Owner Aligning Expectations roundtable, instigated in May, took place on 12 October to review investor voting activities in the oil and gas sector.

The event was opened by Faith Ward, Chief Responsible Investment Officer at Brunel Pension Partnership and Chair of the UK Asset Owner Roundtable. In her introduction, she acknowledged the perceived misalignment between long-term interests and how investment managers are exercising proxy voting. She also explained the need to focus on the oil & gas industries, as these complex industries are the source of 80% of greenhouse gas emissions.

“Today has been a really positive starting point for an essential and ongoing dialogue,” Faith Ward, Chief Responsible Investment Officer, Brunel Pension Partnership. “We have identified some practical steps to ensure we better inform and support fund managers in delivering against asset owners’ climate stewardship strategies”.

The event then enabled participants to explore both the practical challenges that underlie misalignment on voting expectations, and potential solutions.

Bespoke research conducted this summer by Andreas Hoepner, Professor of Operational Risk, Banking & Finance at UCD, confirmed that a gap had developed between asset owners’ expectations and asset managers’ voting activity. It found that:

• Misalignment exists between asset owners and asset managers. It found that, while the impact of this mismatch was minor at specialist asset managers, it increased significantly at some of the larger and broader asset managers.
• Misalignment on US issuers is much bigger than on European issuers.
• Misalignment is much more pronounced on shareholder resolutions than on management resolutions.
• Many specialist asset managers are highly correlated on shareholder resolutions, but some generalists deviate significantly, in some cases correlating negatively.

The research was well received, and participants demonstrated clear recognition of the situation, but also concern at the deep implications.

The collaborative debate highlighted challenges, as well as opportunities for both asset owners and asset managers in creating alignment between long-term stewardship goals and short-term voting.

All participants expressed their commitment to improve communication and transparency, with asset owners emphasising their stewardship expectations and aims, and asset managers better articulating their stewardship approach, decisions and rationale behind voting.

The final research report – the research was undertaken earlier in 2023 – will incorporate these discussions, and be made available later this year.