How are your clients maximising their engagement potential?
Most institutional investors and charities are investing through funds. So, the first thing to realise is that their engagement is with their asset manager, not the company. Engagement is with the institution that they have hired, and because the asset management industry is looking to sell what clients buy, institutional asset owners have the power to make real change. It is the asset manager that invests in companies and can engage with the company. That is who charities need to steward.
Successful engagement requires focus. If you stay realistic about what your target is and what you want to achieve, then you’re going to get results. If you try to change everything without setting clear targets and goals, it is highly likely that these ambitions will end in frustration. Realism is important in engagement.
Do you think that charities understand this?
Sophisticated charities understand that they can change what asset managers offer onto the market and that is important. Asset allocators have the power to drive growth within a particular sector, with the potential to then change the landscape. It is however important to know how the system works to effect real change. You can still campaign as a charity through advocacy and communications to change companies. One of the most effective ways that charities have of using their investments for change is to help change asset managers. Charities can encourage them to up their engagement efforts with the companies that they invest in on behalf of all clients, not just their charitable ones.
How do you help charities to find the right asset managers?
We help our clients in three ways. First, we underwrite asset managers based on how they engage. We assess their engagement capabilities and their engagement teams and what their competitive advantage is. We provide that information to our clients so they can decide who best fits their needs.
Second, we engage all asset managers. In our engagements with the industry we are guided by principles such as disclosure, accountability, good corporate governance and minimising conflicts of interest. The industry is still learning when it comes to disclosure so we ask them what they do, how they engage and with what. We look for clarity around corporate governance and disclosure on any conflicts.
Third, we help individual clients engage when they have specific areas in which they are looking for change and driving forward specific engagement campaigns with their asset managers. The best asset owners decide what to focus on, whether that is biodiversity, net zero or gender parity. You can then push asset managers on that issue consistently. Engagement is not a short-term game; it’s the consistency of the message through time that creates change. It’s never a one-off. Corporations change because they hear a message repeatedly, consistently and insistently over time. It’s a long collaborative journey.
What can charities do to better monitor the stewardship and engagement of their asset managers?
The most effective organisations have created governance structures around engagement with their asset managers. One example of this is the creation of a dedicated engagement and stewardship working group that oversees managers on behalf of the investment committee and engagement. They meet their asset managers once a year and systematically ask whether they have done what they said they would do, and whether they can evidence it.
Annachiara Marcandalli is European head of sustainability and impact at Cambridge Associates
Fast facts
- Cambridge Associates was originally founded as an investment partner for not-for-profit organisations
- Today we work with more than 575 endowment & foundation clients
