November 2023

As a catalyst for driving key conversations and exploring the intricacies of responsible stewardship in today’s dynamic investment landscape, Maanch hosts quarterly roundtables with diverse industry stakeholders.

In this roundtable, we brought together a range of practitioners and experts from top asset management firms and renowned initiatives to explore thematic engagements and their key role in driving transformation through responsible stewardship. Varied themes discussed by experts at the roundtable have been summarised in this document.

Balancing Alpha and Positive Impact

The roundtable discussed the strategic transition from prioritising short-term Alpha to emphasising long-term value creation, to accommodate a variety of investment styles.

Challenges in proving causality

The challenge of linking asset manager engagement with tangible company value enhancement
was a central topic.

• Proving “causality” is metaphorically compared to seeking the Holy Grail. While engaging with partners, witnessing success at various stages and tangible outcomes, the lingering question persists: Is it this direct result of our engagement or the combined impact of shared actions with other contributors?
  
  
• The challenge for asset managers is to clearly show how their efforts, like reducing risk to increase profits, directly lead to actual results. Although there are steps to track progress and collaboration with partners, it’s hard to say for sure if these results come only from their work. It’s difficult to tell if it’s their actions, others’, or a combined effort that makes the difference. This situation makes it complex to prove a direct cause-and-effect link and involves carefully examining and interpreting the evidence.
  

Key Takeaway: The industry is moving towards a more client-centric approach, understanding their concerns, and reducing the emphasis on proving direct causality.

Identifying Material ESG Themes

Collaboration between investors and companies plays a crucial role in selecting the most relevant ESG themes, balancing client interests, and focusing on financial materiality.

Balancing client priorities

• Balancing client interests and regional considerations, themes must be established annually to address material concerns while accommodating diverse demands. Challenges arise when client priorities diverge from designated focus areas, requiring a nuanced approach to reconcile commercial considerations with stewardship priorities. Balancing established priorities & specific client interests ensures a comprehensive approach to stewardship, emphasising the importance of client service.

Financial materiality in focus

• Prioritising financial materiality in engagement directs investment teams to address idiosyncratic issues in portfolios. The focus must be on aligning client priorities with effective engagement, bridging the gap between ambitious, less financially material topics and their increasing relevance. This approach facilitates teams’ engagement on crucial matters like human rights, ensuring direct influence on companies within portfolios.

Read the full summary to delve further into this insightful discussion.