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Manulife Investment Management releases second annual stewardship report emphasizing key aspects for sustainable investment outcomes

SINGAPORE—Manulife Investment Management announced today the release of its second annual stewardship report. The report details the firm’s continued commitment to effective stewardship practices and provides enhanced disclosure regarding those activities, including its collaboration and application of stewardship across public and private markets. In addition, the report discusses three key aspects of the firm’s approach to asset ownership and management to achieve more sustainable outcomes for clients and stakeholders.

The three aspects of its stewardship practices that the firm sees as prerequisite to sustainable investment outcomes are as follows:   

Asset stewardship and the evolving role of global capital—There’s a fundamental shift in expectations of both investors and corporations from being passive participants in the global economy to being active players expected to play a material role in change for the benefit of the wider society. With this shift comes responsibility for asset managers who are assessing and, at times, directly influencing the design and execution of corporate and sovereign plans for mitigating environmental, social, and governance (ESG) risks and capturing potential opportunities.

The power of international collective action—Identifying the financial impact of ESG issues is crucial to drawing a collective consensus toward action. Manulife Investment Management has seen firsthand through work with groups such as Climate Action 100+ that collective action is helping investors become more effective and sophisticated in what they require of investee companies.

Why regional differences matter for stewardship results —Truly effective systemic risk mitigation requires a multipronged approach across asset classes, as well as sensitivity to regional political and cultural differences. One way Manulife Investment Management seeks to address systemic risks is by working with systemically important companies in each region. It’s important to engage with these issuers to address these topics given the potential impact, and one of the related priorities is to encourage other asset managers to do the same. Even without holdings, if engaging with these influential companies can help move the dial on reducing systemic risks, then all of the firm’s client portfolios may stand to benefit globally.

“Active ownership is a central component of our investment and ESG integration processes. And through our stewardship activities, we practice sustainable asset management to preserve and unlock value within our portfolios,” said Paul Lorentz, president and CEO, Manulife Investment Management. “As an active investment manager, we see facilitating the aggregate corporate shift from stating the material facts to performing the material actions of sustainability as one of the more critical tasks of stewardship in the present decade and imperative to the pursuit of sustainable investment value.”

Collaboration is essential

Collaborative initiatives, in which the firm partners with others to magnify its ability to influence outcomes, is a valuable aspect of Manulife Investment Management’s stewardship activities. Notable collaborative activities in 2021 included:

Stewardship application across asset classes  

Alongside its collaborative activity, Manulife Investment Management engaged with more than 1,300 parties in 2021, including over 800 issuers and 126 influencers, regulators, nongovernmental organizations, governments, and vendors. Importantly, Manulife Investment Management shifted focus from the number of conversations to an emphasis on measuring the impact of efforts to mitigate material sustainability risks. There was a strong focus on environmental factors in the firm’s 2021 public markets engagements, with GHG emissions discussed in 20% of meetings and energy management on the agenda in 16% of meetings.

In 2021, these engagement efforts resulted in progress toward, among other matters, more net-zero commitments from issuers; better diversity, equity, and inclusion reporting; and collaboration with industry peers on advancing gender diversity issues.

Within private markets, Manulife Investment Management directly operates timberland, real estate, and agricultural assets where sustainability is woven into operational strategies and execution to raise the bar of sustainable investing. Within private equity, credit, and infrastructure, deep relationships enhance the firm’s influence over key assets and portfolio companies.

In 2021, notable actions across private markets included:

  • The launch of the inaugural climate disclosure report on timberland and agriculture, detailing the approach to climate-related governance, strategy, risk management, and metrics and targets
  • An assessment across the global real estate portfolio that resulted in the implementation of a new building standard requirement to address climate risk and resilience
  • Adoptions of sustainable investing frameworks to support the firm’s approach to sustainable investing for both its infrastructure and private equity and credit businesses

Brian J. Kernohan, chief sustainability officer, private markets, Manulife Investment Management, stated, “In our private markets portfolios, we invest in timberland, real estate, and agricultural assets that we simultaneously operate, which uniquely positions us to influence sustainable business practices. Within private equity, private credit, and infrastructure, deep relationships enhance our influence over key assets and portfolio companies enabling us to continuously engage with co-investors, investee companies, and business partners to encourage sustainable investing best practices while monitoring the ESG-related data available to help ensure the efficacy of this approach.”

“Looking ahead, our focus will continue to be on outcomes-based engagements and setting ambitious goals to ensure our approach to stewardship is built on the tangible progress we’ve made to date,” Mr. Lorentz concluded. “We recognize we can often magnify our voice by partnering with others and bringing our global perspective to help maximize impact.”