There is growing demand from asset owners like us to help address societal challenges via our investments. This demand is reflected by the exponential growth of the ESG market. However, asset manager ESG claims are not always aligned with basic ESG practice, such as voting in favour of shareholder resolutions that support the transition to a low-carbon economy.
New entrants to the market need to understand that ‘ESG 1.0 for beginners’ requires you to vote for such resolutions. For example, how can any asset manager claim to support the Paris climate agreement and be engaging high risk sectors like oil and gas to align and then vote against what they are engaging for?
This AGM season has seen some preemptive management commitments to becoming ‘net-zero’ by 2050 but without meaningful transition plans to get there or interim targets. In other words, the difficult decisions have been kicked into the long grass. This tokenism is not an acceptable reason to vote against or abstain on resolutions that are aligned with the climate science. The climate change resolution vote at Total’s AGM on Friday is an excellent example.
Following all the hype of the past year, with some of the world’s largest publicly listed investment banks entering the ESG market and astonishing AUMs being reported as having integrated ESG, we asset owners are watching this year’s AGM season with great interest.
Leaving aside what good ESG looks like (meaningful integration into stock selection, engagement with escalation etc), it is the basics being put to the test right now. We look forward to seeing which asset managers in an increasingly crowded field clear the first fence.