abrdn, Baillie Gifford pass ESG test; Schroders fails

Baillie Gifford's current Edinburgh HQ

Edinburgh investment giants abrdn and Baillie Gifford are among 125 firms that have been endorsed under the UK’s tougher stewardship and best practice code to stop “greenwashing” by asset managers — but Schroders and 63 others failed to make the grade, the UK’s Financial Reporting Council (FRC) said on Monday.

Asset managers have come under much tougher scrutiny from regulators to prevent greenwashing — exaggerating the climate-friendly credentials of their investments.

“Today the Financial Reporting Council (FRC) published a list of successful signatories to the UK Stewardship Code which sets high standards of stewardship for those investing money on behalf of UK savers and pensioners,” said the FRC.

“The successful applicants better demonstrated their commitment to stewardship — which is very important as we emerge from the pandemic and address significant environmental and social challenges by investing for a sustainable future.

“Following a rigorous review process which considered organisations’ investment styles, sizes and types, two-thirds of all applications (125) made the list.

“This represents £20 trillion of assets under management.

“The FRC received 189 applications from 147 asset managers, 28 asset owners, including pension funds and insurers, and 14 service providers, including data and information providers and investment consultants.

“The FRC was pleased to see investors better integrating stewardship, and environmental, social and governance (ESG) factors into their investment decision-making, reporting on asset classes other than listed equity and identifying the outcomes of their efforts.

“There was also some strong reporting on underpinning governance activities.

“The organisations that did not make the list commonly did not address all the principles or sufficiently evidence their approach, instead relying too heavily on policy statements.

“Other areas of weakness included reporting on the approaches to review and assurance, and monitoring service providers.

“We would also like to see more focus on identifying areas for improvement.

“Unsuccessful applicants are encouraged to consider the individual feedback provided along with the upcoming annual review of reporting to be published in November.

“Unsuccessful applicants can reapply in future application windows.

“The next opportunities are 31 October 2021 and 30 April 2022.

“To remain signatories, organisations will need to continue to improve their reporting as market practice and expectations evolve.”

FRC CEO Jon Thompson said: ““Congratulations to all those who have become signatories to the UK Stewardship Code, which is recognised globally as a best-practice benchmark in investment stewardship.

“The publication of this list delivers on the recommendations of The Kingman Review in respect of stewardship and demonstrates our continued commitment to serve the public interest as we transform to becoming a new regulator.

“We are proud of our robust approach to assessment and encourage those who have been unsuccessful to reflect on our feedback and apply again in future.”

Schroders said it was frustrated not to be a signatory to the revised code.

“According to feedback from the FRC, this is due to the format rather than the substance of our submission …” said Schroders in a statement.

“We believe strongly in the power of stewardship and constructive engagement with business.

“We are confident we will be a signatory again soon.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.