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Voice of the Asset Owner report provides insights for FBAOs

Global investment data and research provider Morningstar (from their investment index division) has published Voice of the Asset Owner, a qualitative survey of institutional asset owners with a goal of understanding the '…motivations, attitudes and challenges of institutional asset owners (AOs) in the current environment'. 

As a qualitative survey, Morningstar conducted interviews with asset owners of various 'types and sizes across North America, Europe and Asia-Pacific'.  As a faith-based asset owner reading this, you are as well an institutional asset owner, and two of their four emergent themes (for some reason termed “Hats” by Morningstar) are particularly relevant for us:

  • Theme 2: Asset owner as communicator & influence 'The importance of managing communication with key internal and external stakeholders emerged as a common theme. Complexities related to plan governance and managing boards of trustees also surfaced in several interviews. US-based AOs face an additional communications-related challenge related to ESG consideration and competing political interests'. A theme we’ve heard from some of you as well, 'when asked about involvement in industry groups such as Principles for Responsible Investment (PRI), some interviewees mentioned weighing the costs versus benefits of specific organizations, which may reflect increasing pressure and resource constraints'.  i.e. is it worth the resources, relative to impact, of joining organizations like PRI?

  • Theme 3: Asset owner as steward of global capital '…a full two-thirds (67%) of AOs indicated that ESG had become more material to their investment process in the previous five years, reflecting their perspective as long-term investors'. Defining materiality however revealed significant variations by types of respondents – 'In Europe, for example, materiality often implies pursuing financial returns to benefit key stakeholders while also engaging more broadly to consider the environmental, social, and governance impact of investments. For AOs located in the US, financial materiality takes center stage, and ESG impacts are thought of as a related benefit but not the main determinant of where and how to invest'.

Further, “When asked about importance of the “E” (Environmental) relative to the “S” (Social) and “G” (Governance) components of ESG, climate remains the key material factor driving investment policy'.  A motivator for the focus on climate is the quality and availability of data for “E” versus “S” and “G” – where data was 'perceived as much better for “E,” reinforcing the focus on climate.” As bluntly stated by one US-based pension fund:

“Climate is in the lead because the data that’s available is better.”

This presents a conundrum we’ve seen in action for faith-based asset owners, where an organization’s faith values always encompass significant views on social issues. You’ve likely experienced this – wide availability of data and meaningful analysis on your portfolio’s environmental impacts, somewhat more sporadic and high-level data on social impacts. But we keep at it; as a friend who teaches sustainable investing at the college level recently remarked, 'thank goodness for faiths as asset owners, they bring a focus to the Social Issues that other ESG oriented investors do not'.


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