Individuals within investment teams report tensions with their stewardship peers at a substantially higher rate than the reverse, Responsible Investor’s stewardship survey has found.
Forty-five percent of respondents to the anonymous survey of stewardship or sustainability teams within investment firms identified the existence of tension. Among those within investment teams, the figure was 83 percent.
The sample of investment team professionals was substantially smaller than the stewardship and sustainability one, but of the six respondents, five reported tensions.
By comparison, 22 out of 40 stewardship and sustainability professionals felt there was no tension between their team and the investment ones.
One investment professional at a large UK asset manager said its stewardship department is “insufficiently cognisant of the idiosyncratic nature of individual companies”.
The same respondent also stated that claims around the power of engagement were “excessive”.
They added that there is “insufficient recognition around which topics investors can genuinely bring about substantive ‘real’ change”.
“Stewardship industry [is] too populated with ‘keen young things’,” they told RI.
Three of the investment professionals that expanded on their answer raised differing time horizons as a cause of tension.
One UK asset owner respondent flagged the “uncertainty about [the] timeline for potentially material sustainability concerns to impact company financials vs shorter term financial prospects”.
They added that limited resources and the required reporting around stewardship are “crowding out engagement activities”.
Another investment professional from a European manager framed the tension as arising from a “shareholder vs stakeholder approach”.
Among the stewardship professions that reported no tension between teams, several cited the fact that their work does not impact day-to-day investment decisions.
A respondent from one of the largest European asset managers to contribute to the survey wrote: “There is little overlap / connection between stewardship activities (other than voting) and investment teams. The stewardship team focuses mainly on tackling systemic long-term global risks, which does not affect most investment teams on a day-to-day, stock-by-stock basis.”
A similar-sized UK asset manager echoed this, telling RI: “Stewardship is well received but doesn’t always impact investment decisions.”
One of the most striking accounts of tension came from a stewardship professional at UK asset owner, who told RI that the investment team saw them as “degrowthers”. They added that investment professionals “don’t see how stewardship makes money”.
Not all respondents saw tension as necessarily bad. Three investors specifically cited the existence of “healthy tension” as an opportunity to learn.
“I think it’s natural and healthy to have some tension or misaligned incentives between these two teams,” said a sustainability professional at a European asset manager. “Bridging gaps and understanding each other’s point of view can only help to get one clear message/ask across at the investee companies.”