Articles | May 14, 2020
Results Revealed Areas of Strong Practice and Opportunities for Improvement
Segal Marco’s Environmental, Social and Governance (ESG) Committee reached out to investment management firms with which we share clients to better understand how each firm approaches ESG matters as an organization.
Our survey results showed that while most, if not all, investment managers are aware of key issues, implementation of select practices is mixed.Get the survey results
The focus on ESG is meant to expand the assessment of a company beyond traditional financial metrics such as cash flow management and profitability and attempt to capture all the tangible and intangible factors that differentiate companies.
Segal Marco selected key ESG data points to sharpen the focus of the survey and allow for comparable results over time. The data points are by no means exhaustive and survey questions were written to minimize ambiguity in the responses.
We surveyed investment managers before the COVID-19 outbreak took hold. One data point that seemed benign at that time but has become much more relevant recently was whether firms allowed staff to work remotely.
We asked this question in the context of employee wellness rather than workforce stability. Remarkably, 93% of firms answered positively on this question. If asked the same question today, we would anticipate seeing a 100% response.
We were pleased to see that 100% of firms reported they had a disaster recovery plan in place. Segal Marco’s research teams have been conducting calls with investment managers to confirm their successful transition to a work from home status.
On the environment, only 12% of firms utilize a trackable carbon offset program for airline travel, and less than half of the buildings used by investment managers were LEED Certified.
On social measures, Segal Marco found only four firms have staff that is organized under a collective bargaining agreement. The gender and racial composition of firms’ leadership skewed heavily white and male, while the numbers for overall staff inched more closely towards equality, particularly on gender.
Notable: Nearly half of the survey respondents have no racial minorities on their firm’s board of directors and slightly more than one-fourth of the respondents reported no women on the board.
A particular data point related to pay equality stood out to Segal Marco’s ESG Committee. Only sixty-two percent of firms reported that they have examined whether a pay gap exists between men and women serving in the same roles.
Notably, only four of the 50 firms that assessed gender pay equity reported a percentage difference in pay. Five reported no pay gap and the rest of the respondents gave no answer or only partial answers, such as reporting only on the UK operations where public reporting on gender pay equity is required. The firm that reported the largest pay gap provided detail on how it aims to close the gap with a discussion of various measures undertaken and public reporting on the issue. We appreciate the sensitivity of the topic and those firms that proved willing to address the issue directly.
On governance, we were pleased to see many firms create opportunities for staff to have “skin in the game” when it comes to corporate ownership. Sixty-nine percent of respondents give employees the ability to gain ownership stakes in the firm.
Independence among board directors is not prevalent, as more than half of respondents reported no board members as independent from firm management. Nearly all survey respondents reported a leadership succession plan is in place.
Every surveyed firm has a code of ethics policy and slightly more than half of the respondents reported zero code of ethics violations in the past year. All respondents reported employees receive training on cybersecurity, which is of heightened importance now as we look to technology to provide our primary communication tools.
This survey marks the first of what will be Segal Marco’s annual review of internal ESG policies at investment management firms.Download the results
About the Survey: Segal Marco Advisors requested its top 100 managers by assets complete a questionnaire of the firm’s internal ESG policies and practices. The survey’s 24 questions focused on the practices of the firm, not of the underlying investments. The response rate for the survey is 81%. Each of the surveyed firms has a longer story to tell on ESG and this report does not capture the full scope of internal focus on ESG among investment managers. Instead, the results provide the state of play on the topics as selected by Segal Marco among the selected investment management firms today.
Segal Marco Advisors provides consulting advice on asset allocation, investment strategy, manager searches, performance measurement and related issues. The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Segal Marco Advisors’ R2 Blog and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. Please contact Segal Marco Advisors or another qualified investment professional for advice regarding the evaluation of any specific information, opinion, advice, or other content. Of course, on all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.
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