‘Engagement-Washing’ within ESG Funds a Result of Industry Confusion – WHEB Asset Management White Paper

• Industry is overly focused on delivering activity rather than outcomes
• Clearer engagement objectives are needed to align activities with client mandates
• Asset managers should report outcomes achieved showing investor contribution not causality

London, 31 October 2024 — WHEB Asset Management (WHEB), the impact investing pioneer and early adopter of the SDR ‘sustainability impact’ fund label, has issued a White Paper outlining the urgency for industry consensus on stewardship and engagement definitions and practices.

In September, the FCA dropped its stewardship outcome framework citing “challenging” complexities. Earlier this year, the Financial Reporting Council (FRC) embarked on a “significant update” to its Stewardship Code to reduce reporting burdens and strengthen stewardship outcomes.

Today, WHEB Asset Management publishes its White Paper – ‘From obstacles to outcomes: Enhancing effectiveness in stewardship and engagement’  – to promote industry dialogue about the inefficiencies within the ‘stewardship ecosystem’ comprising asset owners, asset managers, creditors, companies, regulators, investment consultants, advisors and service providers.

The whitepaper highlighted three key barriers the industry needs to overcome to make sure investor stewardship and engagement is at its full potential:

• Reaching consensus on key definitions such as what an ‘engagement’ actually is and how effectiveness should be measured.
• Focusing on engagement effectiveness in achieving clear objectives and not just levels of activity, and
• Better reporting and communication of the outcomes that have been achieved, evidencing how a specific investor contributes to an outcome and how this delivers value for clients.

Rachael Monteiro, Stewardship & Climate Analyst at WHEB Asset Management, says: “‘More activity’ appears to have become the dominant narrative in investor stewardship and engagement in recent years. In our view, this misses the point. Instead, the focus should be on ‘more effective’ stewardship and engagement that fulfils its purpose in delivering long-term value for clients.

“The stewardship and engagement industry is at a critical juncture. Fiduciary duty, client demand and now regulatory requirements are creating real appetite for more effective engagement. The industry needs to tackle three key barriers if its potential is to be realised.”

Seb Beloe, Partner and Head of Research at WHEB Asset Management, added: “We see these obstacles not as existential threats, but as growing pains symbolic of the rapid development in stewardship and engagement practices. Good practices developed by WHEB and other practitioners are outlined in the paper. These offer potential solutions to strengthen the role asset owners, managers and other practitioners can play in helping to accelerate the delivery of a zero-carbon and more sustainable global economy.”

Download the full Stewardship White Paper here.

NOTES TO EDITORS:

About WHEB Asset Management

WHEB Asset Management are pioneering, global equity impact investors, managing ~£1bn for institutional and retail clients. The team, led by partners George Latham, Seb Beloe and Ted Franks, have been working in sustainable investments for over 25 years and trace the track record for the strategy back to 2005.

As positive impact investors, WHEB’s mission is to advance sustainability and create prosperity through positive impact investing for its clients and the world. WHEB believes in the fundamental connection between long-term positive change and long-term growth.

Known as ‘the impact people,’ WHEB have been investing in companies to achieve a measurable positive social/environmental impact alongside a financial return since 2005. (That’s around when ‘ESG’ was coined and a decade before the UN Sustainable Development Goals, SDGs, were created.)

As established specialist impact investors, WHEB’s equity impact strategy has been tested across market cycles and developed over the long-term by a team of highly experienced investors. Ted Franks, Fund Manager and Head of Investments was a co-founder of WHEB and is supported by a team of eight other analysts including Seb Beloe as Head of Research.

WHEB manages three funds:

• FP WHEB Sustainability Impact Fund (OEIC)
• WHEB Sustainable Impact Fund (ICAV)
• WHEB Environmental Impact Fund (ICAV)

As a B Corp certified company, and actively engaged across influential organisations – including the Impact Investing Institute, GIIN and more - WHEB is committed to transparency and Integrity. The latest annual impact report is the ninth in a series that has garnered multiple awards and has set the standard of impact reporting in listed equities.

Investing in businesses focused on the opportunities created by the zero-carbon transition and sustainable global economy is all WHEB does – now, then and always.

Media Contacts - Cornerstone Communicate

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