Researched in partnership with KPMG, the RIAA study, Engage, Advocate, Collaborate: Unpacking Stewardship in Australasia in 2022, found that 82 per cent of investors in the region collaborate with others to achieve better ESG outcomes.
Around 71 per cent engage in or advocate on public policy issues, which the RIAA said was “effectively challenging traditional ideas of what it means to be a prudent investor”.
Estelle Parker, executive manager, programs at RIAA, said: “Investors are recognising that many ESG issues that are a material risk to their portfolios are not going to be solved by individual engagements with investee companies alone. Issues like climate change and cultural heritage protection are systemic in nature, and investors are increasingly working to tackle these risks using a broader range of tools.”
The RIAA cited examples of initiatives such as Climate Action 100+ and members of its Human Rights Working Group making a detailed joint submission to the Australian government’s review of the Modern Slavery Act.
“Modern slavery presents a number of risks to investments, including reputational risk and brand damage, as well as earning sustainability risks. Our members understand that system and policy change is needed, and it’s not something they can address alone or without strong regulation,” said Ms Parker.
She also highlighted that proactive advocacy from Kiwi investors was key to New Zealand becoming the first country to mandate climate-related disclosures for publicly listed companies and large entities.
“This will greatly help New Zealand meet its Paris Agreement commitments, and helps investors price and value companies, as well as realign portfolios to contribute to a lower carbon world,” Ms Parker added.
The report, which drew on data from a survey of more than 70 investment managers and asset owners, including banks and trusts/foundations, also found that the top ESG topics investors are engaging in are climate change (83 per cent of investors surveyed), diversity, equity and inclusion (69 per cent) and human rights, including modern slavery (68 per cent). Public health/medical issues, biodiversity and nature conservation, and the rights of Indigenous peoples were also common topics.
Mark Spicer, partner, sustainability and climate change at KPMG, said: “Investment managers and asset owners often struggle to measure the success of their stewardship activities. There is an increasing focus on the reporting of real-world impact of investment strategies and robust stewardship has an enormous role in generating these real-world outcomes.
“As investee companies become more sophisticated in their own sustainability reporting and global standards such as ISSB emerge, driving better and more consistent reporting, we expect investors’ stewardship activity to move beyond engagement on basic investee reporting towards how they are implementing real-world change and managing corporate value.”
Ms Parker added that despite the progress, there is still a lot of work to be done.
“The penny is dropping that these kinds of activities fit squarely within an investor’s fiduciary duty. If you’re a corporate or a member of the government, you can expect to have more conversations with investors about ESG issues as they endeavour to manage the long-term returns of their clients’ savings and investments,” she said.
In September, the RIAA released a report that found responsibly managed assets held a 43 per cent share of the total managed funds market in 2021, compared with 40 per cent in 2020 and 31 per cent in 2019.
InvestorDaily will host the ESG Summit in March 2023 where a range of speakers will discuss all things ESG, including shifting consumer preferences towards financial advice that incorporates transparently sustainable, equitable, and environmentally progressive options, how advisers can equip themselves to meet the clients of the future, and take-home strategies for advisers to refine, differentiate, and communicate their ESG offering to their existing and future clients.
If you are an environmentally and socially conscious financial adviser looking to gain a deeper understanding of strategies for ESG investing, this summit is for you.
Click here to buy your tickets and make sure you don’t miss out!
For more information, including agenda and speakers, click here.
