As demands for fossil-fuel divestment become increasingly strident across the globe, a quieter voice calling for engagement with fossil-fuel companies is striving to be heard.
Sources at institutional investment funds, associations representing asset owners, and in the socially responsible investment community, say more needs to be done to bring engagement further into the spotlight.
“The funds that we talk to are already heavily into engagement, but the difference is that they have never before been put on the spot for their engagement performance,” said Julian Poulter, London-based CEO at the Asset Owners Disclosure Project.
AODP's latest index tracking the climate performance of the largest 500 global asset owners found that 232 continue to invest in assets heavily exposed to carbon. Just 24 engage with companies, divest or hedge against climate risk.
“We need to take engagement from being a safe, fluffy, cozy concept that is done in a convivial manner ... and make it a bit more hard-edged,” Mr. Poulter said.
“There is pressure on the investors to show that engagement delivers results, and they should be held to account,” said Edward Mason, head of responsible investment at the Church Commissioners for England, London, which has a £6.7 billion ($10.5 billion) investment portfolio that supports the Church of England.
The starting point is investors' investment beliefs when it comes to climate change and environmental, social and governance factors, said Jane Ambachtsheer, Toronto-based partner and global head of responsible investment at consultant Mercer LLC. “Both divestment and engagement have a place. The appropriate response is investor specific, relating to your ambitions, perception and investment structure.” She said executives at Mercer, which releases its own climate change report this week, also are seeing asset owners engaging further with managers over ESG issues.