LCP report finds gaps in ESG board training and oversight

Although sustainability is a high priority for investment managers, there are big gaps in board training and oversight o environment, social and governance (ESG) issues, according to LCP’s latest Responsible Investment (RI) Survey.

Claire Jones, head of responsible investment at LCP

Canvassing around 150 fund managers, the study found that although 69% had mandatory RI training for staff, less than a quarter (23%) have the same for board members.

It showed that 33% of managers had no one at board director levels with responsibility for the oversight of ESG and stewardship.

The report warned  “that with policy and societal expectations in this space increasing by the day, ensuring that there is clear senior leadership, knowledge and oversight of ESG issues will be crucial.”

The results show that while many managers are improving their responsible investment practices, they are not all keeping pace with the rapid growth in expectations. As a result, there has been a fall in the proportion who are being awarded the top grades since the previous survey in 2020.

The report, however, implied that significant progress has been made in monitoring and assessing climate-related risks.

Thirty six percent of managers said they had already published a firmwide the Task Force on Climate-Related Financial Disclosures (TCFD) report which provides disclosures on the impacts of climate change across their businesses. This is despite there not yet being regulatory requirements in place for them to do so.

Nearly half of investment managers (42%) were targeting net zero emissions for assets under management although 65% did not yet have a clear plan in place to achieve this target.

“It’s encouraging to see many investment managers stepping up to the plate,” said Claire Jones, head of responsible investment at LCP. “The majority are taking ESG issues and stewardship much more seriously, with many making their voices heard through voting and improving reporting on climate change ahead of it being a regulatory requirement.

However, its concerning that there is a significant number who don’t have appropriate board oversight, which is out of step with the rapidly increasing expectations in this space.”

Sapna Patel, senior consultant at LCP, added: “While it’s clear that addressing climate change is very much on the agenda for investment managers, their net zero commitments need to be backed up by clear plans as to how to meet these targets by 2050, and we would also expect managers to improve reporting of climate-related metrics, where coverage of portfolios is still relatively limited.”

©Markets Media Europe 2021

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