City Hive’s Stewardship Council call for data platforms and providers to incorporate ACT Signatory status

City Hive’s ACT Stewardship Council of investment industry gatekeepers have issued a letter to data platforms and providers calling for the ACT Signatory status to be added to firm- and fund-level information as a vital data point and screening tool for fund selectors to assess culture and behaviours.

A company’s ACT Signatory status and the year they signed up are two key pieces of information for investment analysts to understand an investment company’s commitment to transparency around its evolving culture and values in the workplace. Signatories to ACT have committed to a high degree of openness and granularity regarding their culture and how it drives investment results, and to disclosing in a standardised way to create and progress cultural change. The early adopters are demonstrating their commitment to engaging on what has been seen as an intangible but critical topic, with a long-term focus.

Disclosing that an asset manager is a signatory to ACT is fast becoming an important element of a fund selection process, and specifically, the ACT Stewardship Council, a cross-industry body of fund selectors and investors acting on behalf of $2trn in clients’ assets, are calling for data providers to publish an investment house’s Signatory status and the year the firm became a Signatory, as key points of data useful for their investment analysis. It demonstrates their commitment and intent to disclose in line with the ACT pillars (see table in notes).

City Hive and the ACT Stewardship Council are writing to data platforms and providers requesting they add this vital information - the ACT Mark as Signatory status of a firm, and the year it joined.

The letter explains how using ACT Signatory status as a data point, analysts are able to quickly understand that a firm is committed to the disclosures and can act as a screening tool for behaviours, by transforming qualitative information into a quantitative metric.  

City Hive co-CEO Bev Shah said: “There are many cautionary tales about transparency, whistleblowing and the importance of being able to challenge decisions and avoid complacency. It’s very difficult to tell you about the calamities that have been avoided.

“We can point to big scandals that arise from attrition or a longer-term failure of leadership and governance - these things are obvious.

 “But it is harder to spot talent leaking away from a firm over time, it's harder to say when boards have made the right call. Ultimately, good culture is about vigilance and willingness to be challenged and to stand firm on values that have proven to be effective over time.

“Most analysts, buyers or research teams want to be working with investment firms that are horizon scanning, future proofing, who understand the changing market.

City Hive co-CEO Mandy Kirby added: “Asset managers need to be able to authentically communicate that your business should be their business, and a failure to do so leads to a breakdown in the communication, relationships and trust that the industry is built on.

“Asking the right questions on culture can help us to understand about how the firm approaches risk, solves problems, what it takes seriously and its readiness to address issues, make changes and focus on its commitments.

 “Scrutinising these processes will lead to access to better teams, better products and better outcomes. And help prevent the backslide into complacency or inability to spot risks that has characterised some of the more colourful scandals that we have seen.

“Primarily, we think the issue is an information gap. Firms need to have access to the right information to feed into decision-making and risk mitigation processes. A lack of insight on culture can mean that you are taking risks, or indeed that you are missing a good fit.

“We are pleased to see ACT has already been adopted by AM Insights.”

Fund data platform AM Insights is the first to incorporate the ACT Mark which demonstrates the firm is an ACT Signatory as vital firm-level information that can also be considered in fund due diligence.

Lucy Walker, founder of fund data platform AM Insights and member of the ACT Stewardship Council, said: “As a former fund buyer and now founder of fund data platform AM Insights, I understand the crucial role culture plays in the fund selection process. What was once difficult to quantify is now made clearer with the ACT Mark, signalling an asset manager’s commitment to this vital area.

“AM Insights is proud to have been the first platform to add the ACT Mark, and I hope many others will follow.”

Stewardship Council member Andrew Summers, CIO at Omnis Investments, commented:

“Being an ACT signatory is a key first step in asset managers signalling they understand the important role that good corporate culture plays in delivering good investment outcomes. Including ACT signatory status in the main fund databases will be very useful for fund selectors.”

Daniel Babington, portfolio manager at TAM Asset Management, added:

“The inclusion of the ACT Mark from data providers can ensure that progressive and inclusive governance standards, which are a core tenet of the processes of successful funds, pervade the asset manager and wider group. It promotes trust and transparency for fund selectors, ensures those asset managers who are behaving correctly are rewarded and consequently leads to better outcomes for end clients.”

Background

ACT is a disclosure Framework that focuses on culture and how culture can impact client outcomes. By signing up to the ACT Framework asset managers commit to a high degree of openness and granularity regarding their culture and how it drives investment results. Disclosing that an asset manager is a signatory to ACT is fast becoming an important element of a fund selection process. The ACT Stewardship Council, which guide and govern the Framework, have targeted 50 Signatories. You can read more here: Investors ACT.  

Not only is this something fund gatekeepers are increasingly calling for, it is becoming a regulatory requirement for firms to demonstrate why their culture leads to good outcomes for clients: 

●      Consumer Duty clearly sets out that firms should describe how their culture helps to meet the Duty requirements. The guidance states: “Diversity of thought and inclusive behaviours in financial services will help to deliver better consumer and market outcomes including fair value, fair treatment, suitability, confidence and access”.

●      The 2024 FRC Corporate Governance Code amendments strengthen the importance of the role of culture and values, stating that it should be consistent with firm strategy as well as execution in policies and process. Boards are asked to be more transparent and accountable with regard to how culture is assessed, monitored and how effectively it has been embedded.

●      SDR and European legislation has clear intentionality to reduce greenwashing in how not just products are marketed, but how firms are talking about their own capabilities.

●      The 2023 FCA consultation on diversity and inclusion emphasised that improvement “can create better outcomes for consumers and markets by supporting healthy work cultures, reducing groupthink, unlocking talent and improving understanding of diverse consumer needs”. 

Despite this regulatory environment, fund selectors are often left with an insight gap that can affect outcomes if they cannot properly consider how the business works or how teams are built. Insight on culture supports decisions about the suitability of the products on offer and the teams that are providing them.

The ACT Framework has been created to address these gaps, as a standardised way for investment companies to understand, create and progress cultural change and be able to communicate progress effectively via reporting.

ACT disclosures take place via the Door due diligence platform, enabling transparency of disclosures. Door supports the principles of ACT via the ACT Alliance and therefore it is not required to be a subscribed client of Door to report on the ACT Framework.

Notes:

For more information on ACT, Interview opportunities and photos please email: nataliekenway@cityhive.co.uk or visit the new City Hive Press Centre.

To read the full letter: https://www.investorsact.com/data-provider-open-letter

For more information on ACT: https://www.investorsact.com/

Or for the Stewardship Council: https://www.investorsact.com/stewardship-council

For more information on City Hive and to check out our new look website: https://www.cityhive.co.uk/

The full list of ACT Signatories:

Aviva Investors

CCLA Investment Management

EdenTree

Federated Hermes

Invesco

Jupiter Asset Management

Legal & General Investment Management

Liontrust

Lombard Odier Investment Management

M&G Investments

Mirabaud Asset Management

Rathbones

Redwheel

RBC Bluebay Asset Management

River Global

Schroders

TT International

WHEB Asset Management