As environmental, social and governance issues have received more attention in recent years, the stewardship landscape has evolved for asset owners, with a majority now saying they're assessing ESG risks and opportunities or are urging their managers to do the same, according to an Institutional Shareholder Services survey published Tuesday.
Though only 13% of respondents said they assess ESG risks and opportunities for the companies in their portfolio in-house, 34% said they urge external managers to do so and 29% said they do both, ISS' 2020 Asset Owner Stewardship Survey found.
Moreover, 78% of respondents said they engage directly and/or instruct their managers to engage with companies, including 43% who urge external managers to do so.
And 57% said they either vote their own proxies or provide voting instructions to their investment managers, while another 32% delegate voting responsibilities to their managers, the survey found.
ISS surveyed 79 asset owners in July and August, 63% of which were from the U.S., 14% from Canada and the remaining 23% split between European and Asian countries.
When asked about the main driver for their ESG focus, 53% of respondents reported that they incorporate ESG to improve long-term competitiveness and sustainability of the company, while 21% said they consider it part of their fiduciary duties, according to the survey.
"There are clearly insights to be gained for the long-term performance of companies, and since that is protecting long-term performance for the asset owner in terms of returns, it is really important," Ariane de Vienne, ISS' global head of asset owner strategy, who spearheaded the survey, said in a phone interview. "Yet short term it is still difficult because while there is a lot of data, how do you pick the salient ones? Do you have the right platform or are you aware of the right technology available today to report it out? So I think this is a transition period and that's why we have this dichotomy."
The survey found that of the 37% of asset owners that currently measure the progress made via their engagement and/or voting actions, 71% felt that they did not have the right tools or data to do it work effectively. And of the 63% who do not presently measure progress, a majority (56%) said they would like to be able to do so. "Aside from the aforementioned staff limitation, it is reasonable to assume that this group is also held back by the lack of relevant tools or data," ISS said.
Of the respondents that were not performing any tasks themselves — like company engagement, ESG risk/opportunity assessment or proxy voting — 38% said they intend to bring one or more of the tasks in-house going forward.
Though this is the first survey of its kind that ISS has published, Ms. de Vienne said it won't be the last. Asset owner stewardship is a journey "and it's a journey that's accelerating," she said. "It's very encouraging to see that asset owners are taking an active part in it and I think the market participants need to see where asset owners need further services or information or technology to enable them to make their voice heard better."