What can each asset owner do?

Stop chasing the ‘perfect’ data set for system level investing. Given the reality that ESG/senior management time and financial resources are limited, redirect some of energy from “integration” to boost “stewardship” but ensure that the stewardship is genuinely fit for purpose ie it really does address systemic threats/risks in the real world (aka “forceful stewardship”).

  1. Understand where your staff are (what they care about, what they know, what’s holding back progress). Get professional market research help to do this well. Then educate staff about:

    a) What universal ownership means – specifically why it’s important and how it differs from the standard investment paradigm. Use all available tools (eg town hall meetings, AGMs, newsletters, etc) and use methods which build consensus (eg deep canvassing), 

    b) Important systemic threats, especially those that are ignored by the financial system and where universal ownership might plausibly be a part of the way forward. Start with the topics for which there is already most concern. Make use of well-informed and challenging experts and acknowledge their value (ie pay them!)

  2. Engage members in a meaningful way. A professional designed poll is the most basic approach but there are many deliberative democracy options which provide greater benefits, not least deeper understanding of what members think and feel about trade-offs whilst also building real understanding. This translates into legitimacy for the fund’s decisions and resilience for when “events” happen. Vocal stakeholders will always criticise funds and early movers will, paradoxically, often face this most. That’s life! Be prepared.

  3. Educate staff about the best examples of forceful stewardship (eg the award-winners of the PRI Stewardship 2.0 competition, cutting edge AGM initiatives) inviting external speakers who are informed andindependent enough to do “tough love” coaching.

  4. Decide on the 1-2 systemic threats that your fund most cares about. Research what is being done about it. Chances are there is a coalition already formed which focuses on your issue. Join, so as to both strengthen the coalition and enable you to learn more. 

  5. Adopt investment beliefs and proxy-voting guidelines in keeping with universal ownership theory. Model language can be found here.

  6. Engage current and potential investment related service providers (ie fund managers, investment consultants, legal advisers, research providers) to ask what they know/think of universal ownership. Adopt both a hearts & minds and also a contractual approach.

    Hearts & minds: Send them a copy of Moving Beyond Modern Portfolio Theory: Investing that Matters and then ask them about it the next time you talk to them. If they don’t know, help them get informed. If they aren’t convinced, explore why and encourage them to rethink. If they are supportive, focus on what more could be doing to better support you and other universal owners (eg set up a joint meeting). 

    – Adapt mandates to all external asset managers to encourage them to practice stewardship in keeping with universal ownership: model language can be found here.

    – Request proxy advisors provide advice in keeping with universal ownership: a consultation document describing this approach can be found here.

    – Support and vote according to “guardrails,” which are uniform limits on corporate behaviors that excessively externalise social and environmental costs.

    – Pay for impact – this is an area which needs a lot of attention – suggestions welcome