November 11, 2008
Report on UK Fund Managers Finds Room for Improvement on ESG Issues
by Robert Kropp
FairPensions surveys thirty of the largest asset managers and finds relatively strong performance
in governance but insufficient attention to climate change and social issues.
Worldwide assets under fund management reached a record $74 trillion in 2007, conferring great
responsibility upon asset managers who represent shareowners. In this historic time, when pursuing
short-term gains at the expense of sustainable long-term growth is seen as a contributing factor in
the global fiscal crisis, the need for asset managers to engage companies on issues of risk
management and transparency become paramount.
Last year, FairPensions, a UK-based organization that calls for
responsible investment by UK pension funds, surveyed twenty of that country's largest asset
management firms, and found that "responsible investment practices among top 20 fund managers vary
from excellence to apparent absence." The report found fund managers to be generally lacking in
attention to corporate responsibility, insufficient on issues of transparency, and slow in
integrating environmental issues into investment strategies.
On a more positive note, this
year's report by FairPensions, entitled "Investor
Responsibility? UK Fund Managers’ Performance and Accountability on ‘Extra-Financial’ Risks",
revealed a "clear improvement in the combined performance of the 20 asset managers that were
surveyed in both 2007 and 2008, as illustrated by a 23% increase in average performance,"
indicating a "growing interest in incorporating material ESG risks and opportunities into the
Overall, however, the 2008 report—which expanded the number of asset
managers surveyed to thirty—found "a striking disparity of observable performance on Responsible
Investment." The report suggested that "asset managers’ focus on ESG more often than not is limited
to governance issues," and only the report's leaders "could explain their policy on environmental
and social factors in any detail."
Less than half of the asset managers surveyed could
produce evidence that engagement with corporations on ESG issues has produced change in corporate
behavior. Furthermore, more than three quarters do not reveal their engagement activities,
believing that "full public disclosure would undermine their ability to effectively engage with
FairPensions' report found that three quarters of the asset managers in the
top half of its rankings were signatories of the UN's Principles for Responsible Investment (UNPRI), while only
one-fifth of those in the bottom half were.
Of the asset managers surveyed, the leaders
were F&C Asset Management (which attained the only perfect score), Hermes Fund Managers, Insight
Investment, and Aviva Investors. The worst performers were INVESCO Perpetual, Credit Suisse Asset
Management, and Artemis Investment Management. None of the worst performers actively participated
in the survey; their scores are based on the information available on their public web sites.
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