Exclusive: ATP’s ESG boss on managing voting processes and pushing corporates
Jakob Skafte, ESG director at ATP, tells NZI at ICGN in Stockholm how the pension giant runs its £80 billion global portfolio
As ESG director at pension giant ATP, Jakob Skafte is responsible for managing proxy voting and voting guidelines for the fund’s entire global equity portfolio, which is one of Europe’s largest with just over 5.5 members members and assets exceeding £80 billion.
At the annual ICGN conference, taking place in Stockholm this week, Skafte tells Net Zero Investor today that ATP prides itself on an active ownership approach which, among other things, is based on active proxy voting and in-house decision making. Time for a fireside chat.
So, at ATP, you are responsible for managing proxy voting and guidelines for your fund’s entire equity portfolio. How challenging is your job?
In my view, the job has a duality of challenges. From some perspectives it is very straight forward, but at the same time there are enormous challenges embedded if we want to succeed. From an intellectual standpoint the implementation of our voting activity is fairly straight forward. Our stewardship approach is founded on active ownership and responsibility. Fundamentally we spend time and resources in this area because we believe that our efforts here will be returned over time.
Can you elaborate a bit more?
We vote our entire equity portfolio in-house, which obviously is a bit of work. There are quite a few short deadlines subject to seasonality. But the difficulty here comes from the balancing act of always moving forward. Best practice changes in the corporate governance space – so we consistently need to adjust whilst remaining true to our core values. We aim to constantly improve and to be at the forefront of best practice. But at the same time, we don’t want to follow trends just for the sake of it.
So what has been a key priority for ATP?
One of the things we’ve been pushing for some years, along with other investors, is increased gender diversity in boardrooms. We’ve been focused on the markets that lag. One of the markets we’ve been active on is the Japanese market. For several years, we’ve been engaging with companies on this subject. To begin with we simply informed the companies that we expected more diversity.
We progressed in dialogue and eventually we started voting against members of the board if the companies didn’t improve. Last season we then filed a shareholder resolution in one of our investee companies requiring diversity in the boardroom. We’ve seen improvement over time, but if we want to reach a level that is satisfactory then it requires more time and effort – both on our part and on other shareholders.
What would you say is the biggest challenge currently for asset owners and investors?
The flood of EU regulations, Taxonomy, CSRD, SFDR. This will probably continue for a few years, until we reach a more stable level of change. The rules have been implemented over the past few years, but there are still a lot of questions on interpretation. They are new regulatory regimes which demand a lot of new data from investors and companies. It also has ramifications beyond the ESG departments, so a lot of functions need to be on board. Finally, there is a very large gap in the data – how will this unfold over the coming years?
OK, let's stay with the role of the asset owner for a minute. Last month, the boss of Aviva Investors warned companies not to sacrifice long-term sustainability goals in response to near-term challenges posed by energy shocks, supply chain disruption, elevated inflation and the risk of recession. Do you share that sentiment?
Overall, I share the sentiment. But while we can’t sacrifice long-term goals for near-term challenges, we still need to handle the near-term challenges before we get to tackle the long-term goals. But when reading the statement Mark Versey sent to companies, this is also highlighted. I think Mark’s letter is well-timed and an important input into the considerations for the coming couple of years. We have also observed that some companies have dialed back their ambitions and lowered targets. I think that ambitious goals are very important when faced with the challenges on sustainability that we face.
Versey also said the industry's focus should be on the transition to a low carbon economy and reversing nature loss. Are those key priorities for ATP too?
Very much so. I hope those are key priorities for a lot of investors. Just before Christmas we saw the COP15 agreement in Montreal on biodiversity. This can be viewed as the equivalent for biodiversity as what the Paris accord is for climate. The ramifications in the long term are substantial. They are the two single biggest challenges facing the global economy, so they should be priorities for all market participants.
Many pension funds increasingly demand more detailed ESG data, so they can understand and monitor sustainability efforts in their companies better. Do you recognise that trend?
We certainly do. We want to have the same ESG overview of our illiquid portfolio as we have of our liquid side. One of the things we’ve specifically done to counteract the gap in data, is that we’ve created an ESG questionnaire. We send the questionnaire to our unlisted investments born out of our private equity portfolio. The responses give us insight into how far along the companies are in the journey of ESG, and how they are working to improve and develop. We need this information in order to have a more concrete and valuable dialogue with the investee companies.
So how do you shape that conversation?
Our companies receive individual feedback and 3-4 action points, as part of our asset management process. The ESG data furthermore gives an opportunity to showcase the value inherent within – that is cost-savings, reduced accidents, prevention of cyber-attacks etc. What we’re increasingly being told is that ESG gets a more material role in fund exits. Smaller GPs are increasingly regularly selling companies to larger GPs with higher ESG demands and processes in place to implement these. Without data it is a lot more difficult to benefit when negotiating a price!