In this new series, ESG Clarity takes a deep dive into an investment firm’s stewardship activities, discovering their key focuses and processes, and what’s in their engagement toolkit.
Here, Yo Takatsuki, global head of investment stewardship at J.P. Morgan Asset Management, discusses the Golden Age of Electrification and how scrutiny on asset managers’ engagement is evolving.
Click here for the Stewardship Insights series.
What do you think will be the key trends in engagement and stewardship this year?
Taking a long view, which is particularly relevant as engagement is fundamentally about looking forward, driven by research on material issues and being focused on multi-year challenges, I think we will look back on 2024 – in a decade or two – as the peak years of the (second) Golden Age of Electrification that brought enormous opportunities to investors, as companies’ shifted their product offering as well as their sourcing and operational practices.
What is your firm focused on achieving with investee holdings?
We are focused in our engagement on the business strategy and capital expenditure of companies across the global economy and how they are positioned to credibly emerge as winners in this transition. In 2024, we will continue to engage public companies, both large and small, across the world, but also those which are privately held or state-owned, especially in emerging markets like the Gulf States. We are finding that the access to management and quality of discussion has improved significantly, albeit from a low base, in recent times.
We are also starting to understand more clearly the complexities of this energy system shift which includes environmental and social impacts. We have spent the past year researching the metals and minerals needed for wide scale electrification – materials which are not always easy to source. Let’s take the example of cobalt – a critical component in batteries – where child labour continues to be prevalent within small mines in countries like the Democratic Republic of Congo. We will be engaging, extensively, with companies in a wide range of sectors which have exposure to this issue.
Where are clients putting pressure on asset managers to improve engagement?
It goes without saying that interest and scrutiny on asset managers’ engagement and voting practices are increasing from clients, regulatory bodies and other important stakeholders. We welcome this because it helps to ensure our stewardship remains focused on driving clear and evidenced outcomes.
How is your engagement toolkit evolving?
We are a large, global, active asset manager and pride ourselves on the quality and depth of our research, including excellent access to companies all around the world. We are in a strong position to do this robustly. Our north star will always be doing everything we can to generate strong risk-adjusted returns over the long-term for our clients – and engagement is a key driver of how we achieve investment outcomes across asset classes and underlying strategy.
