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Improving the effectiveness of shareholder engagement – A Mistra workshop

On behalf of the Swedish foundation Mistra, onValues convened – for the sixth consecutive year – leading institutional investors, service providers and academic researchers to assess best-practice in a specific domain of sustainable investing. This year, the workshop focussed on the state-of-the-art of shareholder engagement and on the approaches and techniques used by investors to influence company ESG performance, in view of further improving their effectiveness. The questions addressed during the workshop included the following:

  • What are the key factors that contribute to effective engagement?
  • What can be said about the effectiveness of different forms of ‹delegated› engagement
    (e.g. delegation to service providers, to collaborative initiatives, to asset managers)?
  • How can different engagement approaches be combined to maximise effectiveness
    (‹portfolio approach›)?
  • What can a small asset owner with limited resources do to maximise its impact?

Key lessons learned from the workshop can be found in the summary report below:

Download the report
«Engaging Effectively – Summary»

onValues facilitates investor meetings on shareholder engagement, climate change risks and opportunities, commodities investments

In the coming months, onValues will facilitate a series of meetings at which institutional investors will address emerging issues relevant to their investment management and active ownership strategies:

On 26 August 2010, on behalf of the Swedish Mistra Foundation, onValues will convene a meeting of Scandinavian and international investors focussing on the latest insights in the field of shareholder engagement.

On 28 September 2010, onValues will moderate the plenary panel discussion of the 11th International Sustainability Leadership Symposium in Zurich focussing this year on ‹Financing the Transformation to a Low-Carbon Economy›.

On 6 October 2010, in the context of the annual meeting of the UN Principles for Responsible Investment initiative in San Francisco, onValues will facilitate a session on ‹Responsible investments in commodities› that will discuss the challenges and opportunities of this emerging asset class.

Multi-year project on commodities investments launched

In collaboration with the UN Principles for Responsible Investment secretariat, the UN Global Compact and the Swiss Federal Department of Foreign Affairs, onValues has started a project aimed at assessing environmental, social and governance issues related to this growing investment field and at developing a series of practical recommendations for responsible investors. The project will look at commodities exposure across different asset classes, including direct investments in commodities futures and indirect exposure through equity and real asset holdings (e.g. forest and agricultural land). In a first phase, leading asset owners, asset managers, commodity traders and producers, governmental organisations and NGOs are being interviewed in view of understanding their approach to commodities investments.

Sustainable investments in Switzerland rebound strongly in 2009, reaching a new all-time high

onValues today published the results of the regular survey of the Swiss sustainable investment market per end of December 2009, which includes sustainable assets managed in Switzerland through funds, mandates and structured products. A total of 19 managers reported their assets under management in a range of different sustainable investment styles.

After the decline experienced in 2008 due to the financial crisis, the Swiss sustainable investment market has in 2009 returned to the strong growth pattern observed in previous years. Per end of 2009 the sustainable market had reached and surpassed again the peak volume experienced before the financial crisis. The size of the sustainable market per end of 2009 was 34.1 billion CHF (funds, mandates, structured products), which corresponds to an increase of 63.4% compared to the same value per end of December 2008. If we take sustainable funds only, the assets increased by 54.4%. In comparison, the Swiss fund provider assets under management for comparable fund categories increased by 12.2% in the period December 2008 to December 2009.

Sustainable funds experienced a considerably higher cash inflow than the market average in 2009. Net asset inflow in sustainable funds was approximately 22.9%, compared to 4.5% experienced by the average Swiss fund provider in 2009. Funds account for approximately 55%, mandates for 40% and structured products for 5% of the total sustainable investment market volume, with only small changes in the relative share compared to the previous year. Retail / private banking investors have further expanded their majority position in the market (55.4% of the total market, compared to the 44.6% of institutional investors). Equity with its share of 61.5% remains the most important asset class in the sustainable market, having somewhat reduced its market share in favour of fixed income investments compared to last year.

Download the report
«Sustainable investments in Switzerland 2009»

Leading Swiss business newspaper highlights potential conflicts of interest of certain investment consulting practices

The ‹Neue Zuercher Zeitung› has today published a critical assessment of certain trends and practices observed in the investment consulting world. In particular, the newspaper criticises the lack of transparency and potential conflicts of interests related to investment consultancies offering own asset management services and products or recommending those of «preferred partner» banks.  It is worthwhile in this context highlighting the characteristics that make onValues a truly independent investment consultancy: a) the company is fully management owned, b) it does not offer own investment products, c) it does not accept any kind of retrocession or hidden fee (such as database fees) from asset management institutions, d) it excludes «preferred partner» relationships with any asset management institution.

View the NZZ article (German only): Sie_verlassen_onValues «Pensionskassenberatung im Interessenskonflikt»

Eurosif study assesses role of consultants in the responsible investment field

The European Social Investment Forum has recently released a report that provides an overview of the growing role of investment consultants in supporting asset owners define and implement responsible investment (RI) strategies. The study shows that service development relating to RI is a recent phenomenon amongst investment consultants but growing quickly. It highlights the role played by boutique consultancy firms that are focused completely on RI advice, as opposed to larger consultancies that only recently have started to look into the area, RI advice being only a small part of their business. onValues, one of the oldest fully dedicated consulting firms in this space, is portrayed in a separate case-study in the report.  A similar report has been released for North America by the US Social Investment Forum.

Download the report
«Eurosif 2009 Study»

Fundamental shift in ESG

In a recent article, ‹Investments & Pensions Europe› assesses current trends in the Swiss institutional investment market with regard to the integration of environmental, social and governance (ESG) criteria. The article is based on an interview with Ivo Knoepfel, managing director of onValues.

Download a copy of the article
«Fundamental shift in ESG»

Report on European pension funds’ investments in microfinance released

Recent investments by APG, PGGM and TIAA-CREF, among others, have put microfinance investments on the radar screen of pension funds looking for innovative ways to further diversify their portfolio. But a lot of questions remain about the viability of these investments, their long-term risk and return profile, and the capability of the microfinance market to absorb growing pension fund investments. To understand how leading European pension funds already invested or considering investing in microfinance assess the current state and future prospects of microfinance, onValues interviewed pension funds from seven European countries on behalf of the World Microfinance Forum Geneva. The report summarising results from the survey was released today in Geneva.

Download the report
«Ends meet - Current state and future prospects of European pension funds’ investments in microfinance»

Building better long-term investment relationships – a Mistra workshop

Increasing numbers of institutional investors are going on record to state that they believe that ESG issues will have a material impact on their financial performance. However, some believe that the way asset owners are structured, including their internal governance and how they measure and pay external asset managers, may be obstacles to truly long-term behaviour.

In June 2009 onValues facilitated a workshop for investment professionals and academics on this very topic on behalf of Mistra, The Foundation for Strategic Environmental Research. The workshop addressed the challenges of the asset owner-manager relationship in two stages:

1. Understanding how investors take decisions, how they are influenced by prevailing beliefs, and which behavioural biases are most dangerous for the long-term investor; 2. Presenting and refining better long-term models for the asset owner-manager relationship
 
Workshop participants expressed strong opinions on the changes needed to encourage long-term investment behaviour, including:

  • Measuring asset managers' financial performance over rolling periods of at least three years
  • Putting a greater emphasis on the manager selection process: asset owners should spend more time evaluating the quality of processes and people at the asset manager using transparent, systematic criteria
  • Above all, the owner needs to give his managers the feeling that they are trusted: the ‹climate of fear› often found in institutional asset managers is highly damaging to long-term investment

The detailed conclusions of the workshop can be found in the report below.

Download the workshop report
«Winning the long-term game – new insights into asset owners' behaviour and their interactions with asset managers»

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