How boutique asset managers can leverage collective action
CEO Manish Tibrewal discusses how boutique asset managers can draw on collective action to mitigate the lack of leverage in influencing investee companies on ESG initiatives.
Manish Tibrewal, Maitri Asset Management
08 June 2022
Maitri Asset Management was founded as the Tolaram family office in 2015, and it has grown to become a multi-family office focused on active responsible investment management in Asia. Tolaram started in 1948 in Indonesia, and its business currently spans 16 countries. The Family’s philanthropic arm, Ishk Tolaram Foundation, is Maitri’s single largest beneficiary, and contributes to vulnerable communities in Indonesia, Nigeria and Singapore. As such, Maitri is conscious about ensuring that all its investments are aligned with the values of the Foundation.
Two-tier responsible investment approach
Responsible investing is deeply rooted in Maitri’s DNA and the family office takes a long-term focus on sustainability stewardship and preserving wealth for future generations.
Its responsible investing is primarily based on a two-tier approach. The first tier is a negative screen of six traditional “sin sectors” applied to Maitri’s entire AUM, which means adult entertainment, alcohol, recreational cannabis, gambling, tobacco, and weapons are excluded from its portfolio.
The second tier is a proprietary ESG-integrated investment framework applied specifically to Maitri’s Sustainable Funds. This framework includes a coal-exclusion policy as part of the family office’s commitment to climate change and the Paris Agreement.
Maitri is one of two Asian investors that have set and disclosed Net Zero Asset Managers Initiative (“NZAMI”) interim targets of reducing 50 per cent portfolio emissions by 2030. It has been strengthening its focus on stakeholder engagement on the climate agenda. Given the complexities of managing ESG issues, these engagements form a key part of how Maitri influences its portfolio companies.
Driving change through collaborative engagement
The family office started its first corporate engagement in 2019, and since then, it has reached out to more than 90 companies and over a dozen external managers. Maitri has observed that companies and managers are today more willing and open to having conversations on investor expectations of setting emissions reduction targets than before, while conversations on other societal issues continue to present plenty of touchpoints for engagement.
In order to succeed in making an everlasting and tangible impact, Maitri participates in collective initiatives to amplify the impact on the ESG agendas of its portfolio companies. It has joined initiatives such as the Climate Action 100+, Investor Expectations on Corporate Climate Lobbying and Asia Investor Group on Climate Change’s (“AIGCC”) Asian Utilities Engagement Programme (“AUEP”). Maitri is also a participant of the United Nations Global Compact (“UNGC”), a sustainability project to align corporate strategies and operations with universal principles on human rights, labour, environment, and anti-corruption and take actions that advance societal goals.
Its involvement in AIGCC AUEP has allowed the firm to agree on a common agenda with a select group of major Asian utility companies to implement strong governance frameworks; take action to reduce greenhouse gas emissions that is aligned with the Paris Agreement; provide enhanced corporate disclosure; outline physical risks and provide recommendations to mitigate such risks and engage with public policy makers and other stakeholders to support the development of cost-effective policy measures.
Maitri is also a signatory to the UNPRI and the Singapore Stewardship Principles (“SSP”) for Responsible Investors.
Case study on corporate engagement: VA2
Maitri’s engagement and collaborative efforts to achieve positive ESG and stewardship outcomes through collective action are highlighted in its involvement in the Vung Ang 2 (“VA2”) coal-fired power plant. Maitri Asset Management was part of a consortium of more than 20 investors, representing more than US$5.5 trillion in AUM, urging contractors and financiers involved in the VA2 coal-fired power plant project in Vietnam to withdraw their participation due to severe climate-related risks. The construction of VA2 is likely to exacerbate worsening conditions related to the social welfare of communities residing near the coal plant.
Together with the consortium, Maitri co-signed a letter to urge recipients to withdraw from the VA2 project and publicly commit to ending any future involvement in new coal projects worldwide. Following pressure from investors and activists alike, project lead Mitsubishi Corporation pledged to not engage in any new coal-fired power plants. While the company has not withdrawn from VA2, as it is a national project already agreed upon between the Japanese and Vietnamese governments, it has officially pulled out from Vinh Tan 3, a private 2GW coal-fired power plant project in southern Vietnam which is planned for 2024.
As a boutique asset manager, participating in collective investor initiatives, such as the engagement around VA2, not only serve as a learning and collaborative opportunity — it demonstrates the strength in numbers. The initiative, led by Nordea Asset Management, was shortlisted at the 2021 PRI Awards for Stewardship Initiative of the Year.
Maitri constantly aligns itself with industry-leading standards to engage with its portfolio companies. This has enabled the exchange of knowledge and further transparently honed its ESG expertise, so both investor and investee are constantly ahead of the curve when it comes to adapting to the latest ESG trends.
In 2021, Maitri became the first multi-family office in Asia Pacific to earn the B Corporation (“B Corp”) certification, joining a growing global community of companies investing responsibly to build a sustainable economy and using business as a force for good.
SSP Steering Committee
The SSP is supported by the Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX).
About the SSP
Stewardship codes are developed to promote the responsible allocation, management and oversight of capital to create sustainable value for shareowners, beneficiaries and other stakeholders.
Stewardship codes aim to encourage investors to be effective stewards of assets entrusted in their care. The codes foster transparency, improve communication and enhance corporate governance for healthy markets.
Globally, stewardship codes have been introduced in over 20 countries, including Singapore.
The investment market has evolved since the SSP was first introduced in 2016. Investors have been called to prioritise stewardship outcomes and integrate ESG considerations into the investment process.
The Steering Committee considered these global market developments in revising the Principles. The main changes include:
- Requesting signatories, in line with their fiduciary duties, to integrate ESG criteria into their investment practices
- Encouraging signatories to adopt an outcomes-oriented approach when applying the SSP
- Recommending that signatories demonstrate how they apply stewardship in different asset classes
The SSP Steering Committee undertook research on stewardship codes in other jurisdictions and drew on best practices in drafting the Principles. An industry survey was conducted in March 2021 to garner feedback from the asset management industry on their perspectives of investment stewardship. This was followed by an open consultation to obtain stakeholders’ feedback on the draft of the updated SSP in November 2021. The enhanced SSP was officially launched in March 2022.
The SSP is not a set of prescriptive measures.
Using the Principles as an overarching framework, signatories can choose to apply the Principles or explain what they do to fulfil the aim of the Principles.
Signatories are strongly encouraged to submit evidence of their stewardship efforts annually to the Secretariat in a stewardship report supported by data and case studies.
Supporting the SSP
The SSP Steering Committee
The SSP is supported by the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX). The Principles should be read in conjunction with applicable local legislation and regulations. They are designed to complement stewardship codes that are in place in other jurisdictions and investors may wish to utilise the Principles alongside other local and international frameworks to achieve effective stewardship outcomes.
The Steering Committee was officially established on 2 November 2016. It comprises the following organisations:
• Stewardship Asia Centre
• Association of Chartered Certified Accountants
• Asia Pacific Real Assets Association
• CFA Society Singapore
• CPA Australia
• Investment Management Association of Singapore
• Institute of Singapore Chartered Accountants
• Securities Investors Association (Singapore)
• Singapore Institute of Directors
• Singapore Venture Capital & Private Equity Association