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Responsible ESG Stewardship: A Key to Long-Term Corporate Value Creation

As the world grapples with climate change, biodiversity loss, and other environmental, social, and governance (ESG) challenges, asset managers are being called upon to play a crucial role in promoting sustainable investing practices. Despite some asset managers’ claims that ESG hurts financial performance, many experts argue that ignoring these issues can have severe consequences for firms’ bottom lines.

The Importance of Proactive and Transparent ESG Stewardship

European asset managers tend to be more active in ESG stewardship than their peers in other jurisdictions. The sustainable finance regulatory developments in Europe appear to have improved the voting performance of European asset managers on ESG issues. Experts emphasize that proactive and transparent ESG stewardship can help sustainability-focused asset managers differentiate themselves from competitors and stay ahead of emerging trends in the industry.

Key Principles for Responsible ESG Stewardship

  • Use shareholder rights to steer companies towards ESG territory, rather than punishing firms by divesting.
  • Provide funding and resources to the economy while minimizing systemic risks.
  • Engage proactively and transparently with companies on ESG issues.
  • Monitor and report on ESG performance regularly.

Expert Insights

  • “Proactive and transparent ESG stewardship is essential for asset managers to stay ahead of emerging trends in the industry.” - Jane Wilkinson, Luxembourg-based non-executive director and founder of Ripple Effect.
  • “Stewardship, including fiduciary and ESG considerations, are inherent to long-term corporate value creation.” - Natalia Rajewska, Global Head of Sustainable Investment at Nikko Asset Management.
  • “Active ownership is a key component of ESG investing approaches.” - BNP Paribas’s Richard.

Conclusion

Responsible ESG stewardship is essential for asset managers to ensure long-term corporate value creation and minimize systemic risks while providing funding and resources to the economy. By embracing proactive and transparent ESG practices, asset managers can differentiate themselves from competitors, stay ahead of emerging trends, and contribute to a more sustainable future.