Top 50 asset managers have yet to match rhetoric with action to address negative lobbying & corporate policy capture – report

Forceful stewardship, Corporate political capture

New Preventable Surprises report and asset manager report card sets ambition for finance to help prevent corporate policy capture. 

This report is being launched at 10am EST on Monday 24 May with an online event. Please register to attend here.

What is at stake for investors when a former British Prime Minister faces Parliament to explain his actions on behalf of a collapsed investment firm? What does it mean when investors commit to Net Zero climate goals while ignoring the negative lobbying and influence of their portfolio companies? How should investors react to the January 6th 2021 US Capitol insurrection, and what was their role in enabling it?

Corporate policy capture takes different shapes, from public influence campaigns to political finance, to revolving doors between public and private sectors, taking advantage of inconsistent regulatory or transparency requirements. It is pervasive, systemic, and challenges democratic institutions. Given their global influence and long term interests, institutional investors can no longer afford to cast a blind eye to these practices.

Today, we are pleased to release “How can Investors help prevent corporate policy capture?”:  a call to action, 12-point action plan, and report card looking at the practices of the world’s 50 largest asset managers.

This group, with a combined US$66 trillion in assets under management, wields enormous influence. The report reveals that asset managers are only just starting to get serious about addressing negative corporate lobbying and policy capture across key sectors of the global economy. Despite commitments to transparency or positive influence, internal controls on lobbying and consistent external approaches with portfolio companies are lacking. For example:

– 23 out of the 50 asset managers identify corporate lobbying conduct as an engagement issue in their stewardship policy or sustainability reports,

– 16 out of the 50 provide public information on their own trade association affiliations.

– Only 10 out of the 50 asset managers voted “FOR” climate lobbying and political finance disclosure resolutions at four sample companies (Citi Group, Amazon, Boeing, and ExxonMobil) in the 2020 proxy season.

 – 58%  of the asset managers in the report card received an E grade and 26% received a D, indicating significant room for improvement.

The report comes at the conclusion of a year-long research project on corporate lobbying alignment (CLAP). The authors highlight the lack of established best practice, and identify 12 steps across 3 complementary areas of intervention by investors with companies, trade associations and policymakers: better data and disclosure, changing behaviours and strengthening arguments. The 12 steps are intended to stimulate a public debate and inform structured action plans.

The report further notes that the topic is uncomfortable for the financial sector, itself adept at wielding political influence and managing regulatory outcomes. Yet investors can provide crucial support to governments and other stakeholders towards more integrity in policymaking and can contribute significantly to upholding democratic standards. Investor associations can play a critical role in facilitating collaboration and pushing best practice.

With the UK-hosted G7 Summit coming up in June and the Glasgow COP26 talks in November, asset managers now have a unique window of opportunity to announce concrete measures to address negative corporate lobbying and influence in their own organisations, as well as in their external stewardship practices.

Preventable Surprises CEO Jerome Tagger said: “This is a wake-up call for the global asset management community. While it’s positive that asset managers are increasingly thinking about corporate policy capture through the lens of climate or political finance, there is still a long way to turn these words into concrete and consistent approaches. The Global Financial Crisis of 2008-09 showed how the biggest players in the financial markets and their lobbyists cannot be left to self-regulate in the face of systemic risk, but by failing to confront negative corporate influence practices, we are repeating the same mistakes on an ever larger scale. The immense political power of asset management must be wielded more responsibly, and attract more scrutiny from stakeholders and regulators.”

Alison Taylor, Executive Director at Ethical Systems and an advisor to the CLAP project, said: “This report proposes sharp analyses and constructive ideas. It makes it clear that what is lacking on corporate policy capture is not clarity of thought, but a need to build a path forward that leverages a number of strategies.”

Commenting on the impact of corporate lobbying on efforts to address climate change, Brynn O’Brien, Executive Director at the Australasian Center for Corporate Responsibility, and an advisor to the CLAP project, said: “The fossil fuel sector invests significant resources to shape public opinion and slow the energy transition. Investors concerned about climate change should be at the forefront when it comes to countering these harmful influence tactics.”

Commenting on the links between corporate policy capture and democratic stability, Scott Kalb, Director, Responsible Asset Allocator Initiative at New America and Publisher of The Leaders List: The 25 Most Responsible Asset Allocators, said: “Companies and trade associations are spending billions of dollars to influence elections and public policy outcomes, in an effort to bend the rules to their advantage. If we continue with this current approach, where the more money you give to influence politics, the more business you get, democracy itself will be in peril. Preventable Surprises’ Corporate Lobbying Alignment Project shows how institutional investors can act to be a stabilizing force for capital markets and for democracy. The report card demonstrates that it is time for them to step-up and integrate corporate political capture into their ESG frameworks.”

  • Please see the Appendix document for more information on the methodology behind the asset manager report card.
  • Please visit our project page to access our thematic discussion notes
  • Please register for the 24 May 10am EST 3pm GMT launch event  here.
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