Pension schemes and providers have urged asset managers to evolve and strengthen their climate stewardship strategies in a new Asset Owner Statement on Climate Stewardship, highlighting the "imperative" need for climate action.

The statement, which was co-authored and endorsed by an asset owner coalition representing around USD 1.5trn in savings, is a new resource that sets out clear and consistent expectations regarding climate stewardship for asset managers.

Responding to asset managers' requests, the statement aims to facilitate constructive conversations on climate stewardship and embed greater efficiencies into the stewardship chain, empowering asset manager stewardship teams to deliver on their asset owner climate objectives as part of their mandates.

Developed from a recent asset owners roundtable, the statement seeks to address the ongoing and material divergence between asset owner expectations and implementation of climate stewardship, which was identified as the main challenge in the UK Asset Owner Stewardship Review.

Ultimately, the group said it is also looking to raise the bar on climate-stewardship across the investment sector, arguing that, in the lead up to 2030, asset managers need to intensify their stewardship efforts to address the fiduciary risk that climate-related impacts present.

The statement, which is signed by 26 investors from the UK, Europe, Australia and the US, therefore calls on asset managers to evolve and strengthen their climate stewardship strategies in light of the imperative need for climate action.

In particular, the statement says that industry/market and public policy engagement should be core to the climate stewardship proposition across asset classes.

It also states that, where permissible, asset managers should prioritise collaborative initiatives to achieve greater impact and embed efficiencies in engagement activities, and that asset managers’ prioritisation framework for company engagement should be rooted in a robust theory of change that delivers maximum impact.

The statement also emphasises the need for a systematic approach to voting, and also stresses the need for the stewardship function to be appropriately resourced.

Signatories to the statement include Aegon, Brunel Pension Partnership, Church of England Pensions Board, the Pension Protection Fund, Phoenix Group, The People's Pension, Scottish Widows, and a number of Local Government Pension Scheme (LGPS) funds.

Commenting on the statement, People's Partnership head of responsible investment and initiative lead, Leanne Clements, said: “Now more than ever, by working together asset owners and asset managers can contribute to a more efficient and competitive industry, ultimately benefiting members.

“We, as asset owners, are the owners of capital and the mandates, and in these challenging times it is now more important than ever as an asset owner community to send a strong collective principle-based signal to our asset managers as to what we expect of them.

"Time is running out in the lead up to 2030, asset owners and asset managers must work together in partnership to drive meaningful change: not only in the companies in which we invest, but in the underlying economic, social and environmental systems upon which our members depend”.

Adding to this, Brunel Pension Partnership head of stewardship, Vaishnavi Ravishankar, said: “Our collective statement from asset owners representing cUSD 1.5 trillion of assets under management, responds directly to feedback from our managers to hear from asset owners jointly on climate stewardship expectations and represents an important signal to the market.

"The statement signposts what we, as representatives of our beneficiaries’ long-term interests, consider important for fund managers to demonstrate. We expect this to be a living document that will evolve through ongoing dialogues with our managers but in the first instance, codifies what we consider as best practice to inform manager selection and monitoring.”

Scottish Widows investment stewardship lead, Shipra Gupta, also warned that systemic risks and opportunities, like climate change, require systemic and systematic interventions across the investment value chain.

"This statement sets out a clear principles-based framework of asset owner expectations of their asset managers encompassing the importance of influencing and shaping policy and regulation, of working in collaboration with stakeholders, of using their shareholder rights and responsibilities more effectively, and all of it being embedded in appropriate sectoral strategies and relevant technical expertise," Gupta added.

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