Close to two-thirds of the Top65 investment fund managers expect boards to respond and engage with them over their concerns, new research shows.

Advisory firm AQTION finds that 39 out of the 65 “increasingly expect” boards to “seek and address” their concerns about governance and sustainability issues. They also expect transparent and timely updates.

AQTION’s latest stewardship report says investors “may escalate and hold board members accountable if they feel issues raised—through engagement or dissent at general meetings—were not properly addressed”.

It’s also clear that, while some investors have reduced their focus on diversity, equity and inclusion (DEI) in response to political pressure, particularly in the US, many stand by their DEI policies.

The survey finds 47 of the Top65 continue to maintain boardroom diversity expectations, while a lower number, 32, extend their DEI expectations to the general workforce of investee companies.

On boardroom representation, AQTION finds “investors may escalate and hold the chair of the nominations committee accountable if there isn’t adequate diversity at the board level, and vote against their re-election at shareholder meetings”.

AQTION finds that Goldman Sachs Asset Management, Vanguard, Capital Group and AllianceBernstein have removed DEI expeditions from the voting guidelines for this year.

BlackRock has, AQTION says, taken a “middle-ground” approach, mentioning DEI in expectations but offering no guidelines.

The value of DEI

Others, however, continue to stand by DEI policies. Allianz Global Investors says in its governance guidelines: “Boards should aim for a diversity of perspectives and experience, including professional experience, gender, ethnicity, as well as national, cultural and social background that would add value to board and management deliberations and decision making… .”

Morgan Stanley says it will “consider not supporting” the nominations committee chair should it “perceive limited progress on gender diversity”. It expects a third of board positions to be held by women.

Meanwhile, investors have resisted going through a similar rowing back on climate-related expectations, with 41 of the 65 having shared opinion on environmental and social topics, slightly up on 2023’s 40 out of 65.

Perhaps more surprising is the position of investment managers on proxy advisers. Only nine of the Top65 say they have a “high” reliance on voting guidelines from proxy advisers. Thirty five investors indicate only “low” reliance, according to AQTION.

This stands in marked contrast to a hearing currently underway in the US House of Representatives entitled, “Exposing the proxy advisor cartel.” The hearing was triggered by concerns among Republicans that proxy advisers, such as Glass Lewis and ISS, exert too much influence over investment managers.