Seven investor centric stewardship themes for 2022

Stewardship, ESG, sustainability and responsible investment will continue to shift into the mainstream for investors this year.

We are excited by this evolution, given stewardship is central to our investment philosophy and process, says David Sheasby, Head of Stewardship & ESG at Martin Currie, part of the Franklin Templeton group.

He adds: “Biodiversity is one of seven key stewardship themes Martin Currie will focus on in the coming year, as an investor and as an asset management business.

“Biodiversity loss represents a real and tangible risk for business, and it is increasingly important that investors consider the potential impact that biodiversity loss might have on investee companies. Representatives of member states of the United Nations Convention on Biological Diversity will meet in Kunming, China, this year to finalise a framework for slowing the rate of biodiversity loss.

“Encouragingly, we are seeing biodiversity initiatives emerging that mirror the extensive work that has already been done on climate change. We are moving to a consistent and comprehensive framework for organisations to report on nature-related risks within mainstream corporate reporting. Biodiversity will become increasingly prominent as an issue that is intertwined with climate change,” Sheasby says.

He highlights other key trends below:

ESG Fund Flows: “A key feature of investment markets in 2021 was the substantial flows into ESG and sustainable funds. This trend will gather pace in 2022, supported by regulatory changes in Europe, the United Kingdom and the United States.

Sheasby says: “We are excited by the shift of ESG, sustainability and responsible investment into the mainstream. We have been a signatory to the UN-supported Principles of Responsible Investment since 2009 and we’ve awarded the highest rating of A+ for each strategy since 2016.”

Climate change and the transition to net zero will gain prominence: “COP26 increased the sense of urgency around addressing climate change and there is now real momentum in investor-led initiatives, such as the Net Zero Asset Managers Initiative, of which Martin Currie is a part.

“There is plenty of work for investors to do to assess the extent to which companies are aligned to net zero. Engagement will increase as a key tool.”

Proxy voting with purpose: “Investors will scrutinise company climate transition plans with greater attention and will vote ‘consequentially’ on transition plans or for the director responsible for these plans. Shareholders will increasingly use their voting rights to push for action across the whole ESG agenda.

Increased ‘social’ awareness: “The social in ESG has had less focus until now, but that will change. Modern slavery reporting requirements are one catalyst for change and the PRI has launched a collaborative engagement on human rights. The varying impact of COVID-19 have thrown social equity issues into sharp relief.

Focus on diversity, equity and inclusion: “These are key social issues that are taking on greater importance for businesses and investors. Active asset owners will increasingly identify potential challenges and work with companies to address any shortcomings. There is a growing belief in the investment management industry that outcomes should go beyond alpha and improve lives.

Reporting standards: “There is a lot of work going on to standardise classifications and definitions of sustainable economic activity. A key development was the establishment of the International Sustainability Standards Board (ISSB) by the International Financial Reporting Standards Foundation last year.

“The ISSB will be responsible for developing global standards for sustainability disclosures for the capital markets, building on existing work done by the Task Force on Climate-Related Financial Disclosures (TCFD).”

About Martin Currie

Based in Edinburgh, Scotland, Martin Currie is a global active equity specialist with leading credentials in sustainable investing, crafting high-conviction portfolios for client-focused solutions. It had US$22.2 billion in assets under management as of 31 December 2021. Investment excellence is at the heart of its business. Central to its philosophy is a stock-driven approach, based on in-depth fundamental research, active ownership and engagement and skilled portfolio construction. Martin Currie is rated A+ in all three categories under the Principles for Responsible Investment (PRI) 2020. As a Specialist Investment Manager of Franklin Resources Inc., it also has the backing of one of the world’s largest asset management firms. For more information, please visit martincurrie.com.

About Franklin Templeton

Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 165 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company brings extensive capabilities in equity, fixed income, multi-asset solutions and alternatives. With offices in more than 30 countries and approximately 1,300 investment professionals, the California-based company has over 70 years of investment experience and approximately A$2.2 trillion in funds under management as of 31 December 2021. For more information, please visit franklintempleton.com.au.

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