Data platforms and providers should add ACT signatory status to firm- and fund-level information as a vital data point and screening tool for fund selectors to assess culture and behaviours, according to an open letter issued by City Hive’s ACT Stewardship Council.
Citing Consumer Duty, the Corporate Governance Code and the Sustainability Disclosure Requirements, the letter flagged that over the past year the regulatory environment has seen an uptick in requirements for firms to demonstrate why their culture leads to good outcomes for clients. Nevertheless, insight gaps remain.
The ACT (Action, Challenge, Transparency), therefore, is designed to close those gaps by providing a disclosure framework focusing on culture and how culture can impact client outcomes. By signing up to the ACT framework, asset managers commit to a high degree of openness and granularity regarding their culture and how it drives investment results.
According to the council, a company’s ACT Signatory status and the year they signed up are key pieces of information for investment analysts to understand an investment company’s commitment to transparency around its evolving culture and values in the workplace. The letter explained how, using ACT signatory status as a data point, analysts can quickly understand whether a firm is committed to the disclosures and can act as a screening tool for behaviours by transforming qualitative information into a quantitative metric.
City Hive co-CEO, Bev Shah (pictured), commented: “There are many cautionary tales about transparency, whistleblowing and the importance of being able to challenge decisions and avoid complacency. It’s very difficult to tell you about the calamities that have been avoided.
“We can point to big scandals that arise from attrition or a longer-term failure of leadership and governance – these things are obvious. But it is harder to spot talent leaking away from a firm over time, it’s harder to say when boards have made the right call. Ultimately, good culture is about vigilance and willingness to be challenged and to stand firm on values that have proven to be effective over time.
“Most analysts, buyers or research teams want to be working with investment firms that are horizon scanning, future-proofing and who understand the changing market.”
City Hive co-CEO Mandy Kirby added: “Asset managers need to be able to authentically communicate that your business should be their business, and a failure to do so leads to a breakdown in the communication, relationships and trust that the industry is built on.
“Asking the right questions on culture can help us to understand about how the firm approaches risk, solves problems, what it takes seriously and its readiness to address issues, make changes and focus on its commitments.
“Scrutinising these processes will lead to access to better teams, better products and better outcomes. And help prevent the backslide into complacency or inability to spot risks that has characterised some of the more colourful scandals that we have seen.
“Primarily, we think the issue is an information gap. Firms need to have access to the right information to feed into decision-making and risk mitigation processes. A lack of insight on culture can mean that you are taking risks, or indeed that you are missing a good fit.
“We are pleased to see ACT has already been adopted by AM Insights.”
Lucy Walker, founder of fund data platform AM Insights and member of the ACT Stewardship Council, added: “As a former fund buyer and now founder of fund data platform AM Insights, I understand the crucial role culture plays in the fund selection process. What was once difficult to quantify is now made clearer with the ACT Mark, signalling an asset manager’s commitment to this vital area.
“AM Insights is proud to have been the first platform to add the ACT Mark, and I hope many others will follow.”
Meanwhile, ACT Stewardship Council member Andrew Summers, CIO at Omnis Investments, said including ACT signatory status in the main fund databases “will be very useful for fund selectors”, while Daniel Babington, portfolio manager at TAM Asset Management, added: “The inclusion of the ACT Mark from data providers can ensure that progressive and inclusive governance standards, which are a core tenet of the processes of successful funds, pervade the asset manager and wider group. It promotes trust and transparency for fund selectors, ensures those asset managers who are behaving correctly are rewarded and consequently leads to better outcomes for end clients.”
