Campaign for Better Governance: ‘We’ve still got a long way to travel’

Panellists reflect on the governance and corporate culture in the investment industry over the past two years


It has been two years since MA Financial brands ESG Clarity, International Adviser, Portfolio Adviser and Expert Investor launched the Campaign for Better Governance. At that time, the industry, and its investors, were reeling from the collapse of Woodford Investment Management and other events where investor interest didn’t appear to be at the heart of certain decisions.

We wanted investment managers to encourage the investment sector to practise what it preaches and ensure that, alongside the businesses to which it allocates capital, its own governance is at the highest possible level.

As the Woodford saga comes to an end, we thought it would be an appropriate time to relaunch the Campaign for Better Governance with a refreshed look and invite industry experts on governance and corporate culture into our London studio for a roundtable discussion on the progress made over the last two years – you can view this above and the transcript is below.

If you would like to be involved in our Campaign, please contact

Natalie Kenway, editor in chief, MA Financial

Campaign for Better Governance: Two years on roundtable


  • Bhavini Shah, co-CEO, City Hive
  • Paul Lee, head of stewardship and sustainable investment strategy, Redington
  • Jake Moeller, senior investment consultant, Square Mile

NK: Thank you to our panellists for joining us today. The first question I wanted to put to you is how far do you think we’ve come in the past two years in terms of the industry’s governance? Has corporate culture improved in the investment industry? Does anyone want to take that one first? I’ll come to you, Paul.

PL:  I’m going to be downbeat, I’m afraid. I’m not sure we’ve come very far. We’ve certainly not come far enough. I think the industry’s reaction to the FCA proposals on the Consumer Duty show just how far we’ve still got to come, frankly. The regulator saying let’s do the right thing by our customers shouldn’t be that big at ask. And yet the industry has responded very negatively to that and found the problems with it rather than trying to find solutions to it. That tells me we’ve still got a long way to travel.

NK: Bev, I know this is a big focus for City Hive…

BS: I agree with Paul, we haven’t. But what I think has changed is the awareness of the subject matter. Obviously the regulator has pushed for a culture change for a while and Consumer Duty isn’t the first regulation to come out from the regulator on this, whether it’s here in the UK or in other jurisdictions. But I think the catalyst for asset managers taking this seriously and putting in some policies and looking at their own culture is actually the clients.

Because for analysts this is getting a little bit more crucial because they are now the barrier to the retail customer. They are the ones that will be making the recommendations. And I think I feel analysts now, if they don’t know it yet, there was certainly the awareness race that is happening around the analytical process, capturing not just the product, not just the investment side and not just the operational due diligence of the asset management company, but more broadly trying to understand the ethos, the values and the purpose.

NK: I’d definitely agree the awareness has increased and obviously we’ve been watching that a lot with this campaign. Jake, anything you wanted to add to that?

JM: Well, I have a slightly more sanguine view. I think there are some negatives and I tend to be more optimistic. I think a lot of negativity comes down to a few bad apples.

We have a very asymmetric industry. We do a lot of good stuff for many years. We don’t get a lot of credit for it. And then something bad happens, we get a lot of negativity and it’s a very, very asymmetric payoff. Something like Woodford causes a huge problem for our industry, but it was an isolated incident.

I think there’s a virtuous circle of learning. I think gatekeepers have got a lot better at looking out for things. I think there’s a lot more proactivity between the gatekeeper and the fund managers. I think, in turn, the fund managers are asking more questions of the stocks in the companies that they invest in, and I think that’s a good thing.

I think the media is increasingly playing a more gatekeeper type role by bringing stories and scandals to the fold. That’s excellent work there too. When you put all those things together, I think there is a lot more virtuosity in that circle than negativity.

BS: It’s the right recipe. All the ingredients are in place for the change you need to see happen. But unfortunately there’s no quick fix. I think, like with a lot of different things within the industry that we’re having to focus on now other than just returns, ESG and diversity, there’s often the thing around people saying that it is not happening quick enough. Unfortunately, isn’t it something that over time we won’t notice happening, but then we’ll get to a point where it’s happened and we’ve got used to it and then we move on to the next stage of a evolution.

PL: That’s really true, isn’t it? Because culture change is a process. It does take time. We have to accept that it will not be the swift thing. And all of our lives have been on hold for a couple of years, so speed has been even more glacial than it might have been otherwise.

BS: But also broadly with culture, the first step is understanding it. And as an industry, we’re so used to looking at numerical data, but culture itself and understanding it is actually more qualitative. It’s a narrative that you have to look through and unpick, it’s not like when you put the finger on the pulse of the whole heart. And that’s how we at City Hive position it – it is the heart and soul of an organisation.

NK: You touched on before that analysts are starting to look at this now, they’re not just looking at the performance, they’re asking about the corporate culture within a fund management firm, for example. But what sort of things do they need to be considering? And do you think that it’s taken a while to get to this point? Should it have been happening a lot sooner?

JM: My view is that we, as an industry, we are a supertanker. And I think if you look at some of the things that we’ve been criticised for – a lot of homogeneity in the types of people that are involved in this business – those sorts of things do take time to change.

But now the whole zeitgeist is about change because investors and fund managers have suddenly realised that good companies and the generation of good returns are interlinked. So once that realisation is no longer tenuous and you accept that good people can generate good performance and bad actors generally won’t, or might for a while but then don’t, you start putting these things together and it starts to become a more recognised thing. But it’s slow, it’s harder to move.

BS: But it’s also the market is really crowded. So if you’re a gatekeeper, the number of funds you have to look at and can pick from – it’s immense. So, I suppose what’s your value as a gatekeeper? If it’s not to be the best analyst that you can be. It might be that 10-15 years ago you didn’t have to look at culture because there was less choice. Maybe you were able to pick, but now you’ve got a piece of paper between the funds you look at and, actually, if you’re looking to add value as a fund gatekeeper, you need to enhance your own process and start to look more broadly at the firms that are stewarding your clients’ assets at the end of the day. And that’s where I suppose as a gatekeeper you come in because you were that front line between Woodford and a retail customer that now Consumer Duty is going to make everyone responsible for.

PL: We’ve done a lot of work on culture since I joined Redington a couple of years ago now. And it is absolutely part of our standard process of assessing fund managers and we are keen not to think just about the diversity aspects, although obviously that’s really important, but it’s how the firm actually works and who gets listened to is the fundamental thing.

And having those voices in the room is just crucial for understanding whether different perspectives will be heard and different views will be listened to. One of the very simple things that we now require in every meeting is to have somebody from a minority within that firm at a meeting and we make sure we’re asking them questions. And just the way in which they are allowed to answer the questions and not interrupted and overruled, you can learn so much from the dynamic of hearing them speak and the extent to which they’re allowed to speak within the firm. That, for us, is really, really crucial to our understanding of the tone of the firm and actually its ability to generate returns over time.

NK: That’s a really interesting approach. Is that something that you found with ACT as well? Are those conversations happening within lots of investment managers?

BS:  Yes. We firmly believe that elements like the diversity of an organisation are really an output of the culture being right. And the reason why any investment firm wants to get the culture right is because you want to create an environment where people feel psychologically safe to make decisions, and that means everybody in the organisation.

So really you get the culture right and then you’re going to have people who feel comfortable to speak up, to make decisions. And if I think back to [2008] – a long time ago, a different management crisis going on at the moment, and some of you guys might remember this, when you had conversations with fund managers just after Northern Rock and all of that. Some fund managers said they went out to buy a sandwich and saw people queuing at the Northern Rock branch and went back to the office and sold holdings and some didn’t. And, for me now, when I think back on those conversations around 2008 and after when we were unpicking what happened during the credit crunch, you could really see the fund managers and the decision makers who felt that psychological safety within their organisation, that they could go back and make that decision. And the ones that didn’t.

And that’s what we should really be trying to achieve in the industry, because it’s not, you know, the rhetoric around the right thing to do for society, it’s actually about being able to make the right decisions to improve investment performance for the end customer.

NK: Absolutely. Jake, do you have anything to add on those points?

JM: Yes. So I think to the extent that we are subject to the winds of the markets a lot the outcomes that come as a result of a crisis will necessarily drive change.

And we seem to have been through a lot of these crises. And from my experience, it’s those companies that have got a broader depth of different types of people, different skill sets that are best able to weather a crisis. You can’t stop the crisis, but it’s how you navigate, you shoot through it. So if you’ve got good, strong leadership – I think most genuinely, most leaders that I come across are genuine, they want their business to succeed and they are aligned with their shareholders and they know that in order to do that, to get better shareholder outcomes, they’ve got to have a business that’s able to get through storms. Every time we have a crisis, they come from slightly different angles. The wind comes from a different direction and you have to be able to move yourselves and to make sure that you’ve got to best negotiate that sort of wind.

It’s ongoing and it’s those companies that haven’t learned, that haven’t broadened their staff base or their policies around work or flexibility and things like that, that will invariably find it tougher going.

NK: Okay, I wanted to ask about something else. That’s quite topical at the moment. The FCA and lots of regulators are cracking down on greenwashing and what we’ve seen in the SFDR recently is lots of asset managers downgrading Article 9 funds to Article 8 .

This is still a relatively young part of the industry and, in essence, I guess that’s asset managers, they are governing themselves because that’s how they’re there isn’t really hard and fast rules on SFDR. So I want to ask you, is that a positive or a negative that they’re downgrading because they again, I guess they don’t want to be caught out for not meeting their Article 9 criteria. But also it isn’t clear and they could be doing the better thing by investors by downgrading. What’s your interpretations of that?

JM: Do I think that fund managers used the SFDR labels as a marketing ploy? I think they did. Is it a good or a bad thing? I think that any regulatory initiative takes some time to bed down. This was prescriptive first and then it became clearer what the regulatory requirements were going to be, and then fund managers adjusted. And I don’t blame fund management groups for using anything as a marketing ploy because we have got to accept they have to market their product, right? They’ve got to get assets under management. Will the same thing happened with SDR? Potentially. It will take a while to bed in. I don’t see it cynically as people labelling Article 9 – at first it was self nominated, you didn’t quite know what was required and it seemed like a good idea. They’ve made some marketing headway and firms are readjusting. That’s just the regulation.

BS: I agree with Jake and that’s like many of the regulations that have come out; it’s the policy that’s put out, and then it’s about how we as an industry respond. Often, many firms are just looking for the first movers to see who’s going to create that benchmark of what’s acceptable. It’s often we will see the same names, it’s the bigger firms who are more at risk, whether it’s from a brand perspective or they just feel more comfortable in their own existence due to move first.

Maybe that’s the right way to go, because at the end of the day, the regulators are setting policy. They’re not practitioners when they don’t have to deal with the day to day of the industry. They don’t, in my opinion anyway, tend to engage as much with practitioners as they should to understand the day to day.

So maybe it’s the right way to adjust the balance for some of these things that may have gone a little bit too far.

NK: And your thoughts on those downgrades?

PL: I think one of the interesting things when SFDR first appeared was actually people were quite slow in nominating things. It was only when the competitive pressures came in that they started nudging themselves up.

So actually the original response was a bit more honest and I was really encouraged by that. And then the marketing mindset overtook it. Unfortunately, I think we are back to a place where people are no longer over-promising in the context of how we now understand the rules. I think there is a danger, though, that we might get to that point where people are under-promising.

And I think that the negativity around perceptions of greenwashing and also the noise that we’re seeing from the US from certain politicians, is making people quite safety conscious in this area. And actually that I don’t think is helpful for honestly communicating to our customer base and helping them understand what is on offer and what’s available to them.

It’s not often that our industry is under-promising and over-delivering, but I think we might be getting towards that point here. And that is just as unhelpful as overpromising and under-delivering.

BS: That’s a really interesting point you make. It’s when you start to see maybe the companies’ targets and goals becoming misaligned from the investors and the client’s goals and targets. Where you’ve got a corporation that has to deliver profitability and whether it’s a partnership structure or to shareholders, that’s where you start to get towards the middle ground because you don’t want to alienate the anti-woke brigade in the States versus the impact consumer. You’re not as aligned as you would have been before maybe.

NK: It’s interesting. I guess that’s something that might be addressed with Consumer Duty as it has that big focus on outcomes and the alignment. That brings me on to asking is the industry considering all stakeholders or is there a part of the industry, something in the chain, that’s getting the raw end of the deal?

JM: I think if you look at the SDR consultation paper, it struck me that advisory groups weren’t really part of that equation and that kind of surprised me because why wouldn’t they be, you know, some of them that had discretionary portfolios may have had a peripheral interest in it.

When we talk about broader consultation, we’ve really got to engage the advisors earlier. We know how busy they are. We know that many have left the Consumer Duty deadlines to the last minute and they’re worried about that. So the lead time in the interaction with the advisory networks has to be a little bit more proactive. Because we recognise that they are so busy that they have a little bit more time to digest and digest the regulatory initiatives and the feedback is very important.

So that was just one area. Generally, I think communication is pretty good. At the gatekeeper level where I sit we have information coming in from all areas and we, in turn, feedback to multiple touchpoints; directly to companies, sometimes and certainly funds and managers. I have no problem on that side of things.

NS: Bev is there anything that you think, what role do advisors play in covering the industry? What can they be doing to play that role?

BS: I think like with the entire investment supply chain, advisors can really play up that part between the retail customer and holding the next line up to account.

Often, a lot of the conversation with policy makers tends to probably stop around this mark. The asset owner community who obviously aren’t often making the decisions because investment consultants are for them and they are stewarding the asset, so there’s often high level conversations about various subject matter happening between asset owners, policymakers and investment consultants.

And we tend to see the conversation stops with other practitioners further down, other types of gatekeepers, other types of wealth managers and then advisors, and though this area is really key, we need an industry where we want to service everyone, not just the type of people we have at the moment.

As you know Natalie, at City Hive we’ve done a lot of research about the gaps that are happening in society with vulnerable groups whether it’s people with disabilities and how they access investing and financial instruments, whether it’s the ethnicity investment gap… there’s lots of areas where we may have got very good at greenwashing on subject matter, but we haven’t got very good at how do we speak to different groups that should be really investing for their future. So I think that’s where advisers can really help in ensuring that they are being that kind of voice and conduit for keeping that debate going.

NK: Thank you. And to sum up then, I want to ask you also, where do we go from here? What would you like to see the industry do more of or where would you like to see the industry positioned in terms of its attitude to corporate culture and governing itself in say five years’ time?

PL: We’ve got to start with a little bit more honesty about where we are, because only when we do that can we actually move forward and make the necessary improvements. It’s a small touch point, but every year we do a survey of the fund management industry, and one of the things we ask about is diversity.

And we ask a very simple question is ‘do your investment teams reflect the demographics of the world around you?’ And the vast majority of managers say yes of course, only 7% say no. And yet it’s less than 9% of teams that have more than 40% women. Unless the majority of the industry is operating in a world that is three-quarters male, they do not reflect the demographics of the world around them.

We just need to be honest about where we’re at in order to move forward. If we can do that and actually understand that, reflect on it honestly, make the changes that are needed, then in five years’ time we could be in a very different place. But if we don’t start from a position of honesty now, I worry that we won’t make the progress overnight.

BS: I think for me, it’s certainly a positive that bearing in mind that the ACT framework launched in May and we’ve already got over 100 global asset managers reporting honestly on who they believe they are against their own values. So we’ve got kind of a starting point. What I’d like to see in five years though, is a recognition from more management teams within the asset management industry that their corporate culture and elements of their diversity are actually a business critical thing for them from a point of return on investment and profitability point of view. I think at this point in time there is a lot of greenwashing happening on the subject matter of whether it’s diversity or culture. I mean, in five years, hopefully in the same way, they recognise that the ‘E’ of ESG is something that will bring in revenues for them and grow assets, the management teams will recognise that this does impact their profitability. It will do because it’s gatekeepers looking at their ACT framework as part of their due diligence.

JM: I think the fund management industry is, generally speaking, run by good people and every now and then there are a few bad apples. I think the narrative is getting better. I think we have a lot to learn, but I think the fact that there are initiatives such as ACT with the City Hive organisation, you’ve got a lot more collaboration happening with fund groups now in terms of how they approach the companies they invest in. What I think I would like to see, I’m going to Paul’s point honesty, is a development of collaboration and fund managers themselves taking controlling their own narrative better so that the good work they do, and there is much of that and it’s getting more prolific, is articulated in the best way. I think a lot of these stories are very, very positive. We just don’t hear about them and we only hear about the bad things.

I think the next five years you’ll see enormous change in the way fun groups are run and in the way they think, and hopefully that will be reflected also in investor outcomes.

NK: Yes, that will very interesting to see how that pans out. We’ll be reporting on that in our Campaign for Better Governance. Thank you all for your contributions, your insights, it’s been really great to have you today.

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