Resources dedicated to the stewardship of investment capital should double as a proportion of total investment resources at industry level, according to a report from the Thinking Ahead Institute (TAI).
Commissioned by the Principles for Responsible Investment (PRI), the report – Putting resources where stewardship ambitions are – shows the industry average stewardship resourcing level is currently around 5%, as a percentage of total investment management costs.
However, respondents to a survey conducted for the report agreed that this is inadequate and not fit for purpose, leading TAI to conclude that the global investment industry needs to double stewardship resources over time to meet the increased demands and needs. This transition would be multi-year.
The report includes research conducted in collaboration with a technical working group of PRI members, and a Global Stewardship Resourcing Survey of 69 separate organisations, managing a total of $16trn in assets globally.
Marisa Hall, head of the Thinking Ahead Institute, commented: “Our collaboration with the PRI on this essential project is driven by our mission to support long-term value for the investment community. Stewardship has always played a crucial role in the investment industry but is too often under-resourced.
“This work has further strengthened our understanding of the many nuances and challenges of resourcing stewardship – even as the industry increasingly recognises stewardship not merely as a necessary function but as a system-level and value-adding feature. We look forward to feedback from across the global investment industry on next steps and many future discussions on implementing these findings.”
The report also points out that the investment industry currently lacks the measures of costs needed to unpack the resourcing model for stewardship. Therefore, TAI has also launched the Stewardship Resources Assessment Framework to enable the investment industry to assess the resources available to stewardship efforts in a more structured way, as well as the subsequent improvement of such stewardship efforts over time.
Examples of resourcing include spend on internal staff time, third-party providers of stewardship services, data, subscriptions, memberships and reporting costs, among several others mentioned in the report.
Nathan Fabian, chief sustainable systems officer at the PRI, added: “Strong stewardship is needed now more than ever to fulfil fiduciary duties and deliver on client and beneficiary interests over the long term. These ambitions can only be met with adequate resourcing at industry level. We call on investors to pave the way for data-driven approaches to stewardship resourcing which foster accountability, transparency and, ultimately, impactful change.”
