Talking about culture, and talking about ACT

Using this resource

As an industry professional you have your own views on the role of culture. These notes are intended to support you in understanding what ACT is and why City Hive is invested in culture, and you can use them freely. We appreciate any public facing comments that you make via panels, videos or other content.

What is ACT and what problem is it solving? 

• The ACT Corporate Culture Standard and Framework was designed to create norms and structure for conversations on culture and values, and how they support investment practice. It was launched by City Hive in May 2022, to address the gap in guidance and structure on culture.

• In an increasingly crowded marketplace, the ACT mark publicly demonstrates an understanding that firm culture is crucial when assessing risk and values alignment.

• The Framework is a conduit between asset managers and their clients. Disclosures help to draw out the culture of investment decision making, by capturing operational social and governance factors that explicitly support progress in a firm and that will help attract and retain talent. 

• Reporting takes place via the Door due diligence platform, which creates a track record of responses over time and also saves time; it allows a firm to report once and share widely. The client assesses the applicability of the information they are given and the firm’s appetite for engagement and progress.

Why focus on culture – and why now

Investment companies play an increasing role in shaping an equitable and sustainable society, as they drive global change and action via their investment practices. Stakeholders from clients and employees to wider society expect investors to demonstrate evidence that value creation and stewardship of wealth is in responsible hands, because they are a responsible business. 

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. 

• A firm’s culture and values are central to understanding how it will deliver on its real-world commitments and this includes how it approaches risk, opportunity and how it attracts the best talent to deliver client outcomes. This includes but is not limited to the firm’s approach to diversity, equity and inclusion.

• With high profile upsets and scandals in recent years that have in many cases related to a failure in governance and oversight, asset managers (and wider industry) have a confidence gap to fill. 

• Whilst the regulatory pipeline has ramped up expectations for disclosure via Consumer Duty sustainability regulations and consultations on diversity data, and alongside growing stakeholder demands, there is little guidance for investment companies to be able to tell their story. This topic is of increasing interest to gatekeepers as they make decisions on where their assets are held. 

  Asset managers face challenges from different directions:

• The growing focus on producer – how firms are run, and not just the products on offer.

• Efforts to address greenwashing – with increased pressure to scrutinise the asset manager behind the promises of sustainable practice. Pressure from consumers and from regulators means more and varying disclosure requests.

• Transparency – being able to tell the firm’s story effectively, authentically and comprehensively is an competitive advantage that we believe will become mission critical. 

  The risks of failing to take action authentically and transparently are increasingly significant in an industry that is built on relationships and trust.

How do ACT questions and Pillars work?

ACT stands for Action, Challenge and Transparency, which references how the questions progress across the framework

• Action – What are you doing now? 

• Challenge – Could you be doing it better - and how?

• Transparency – Are you getting the right information to the right people?

Because culture is intrinsic to how a business runs and delivers for clients, firms articulate this across three pillars that go across the whole business. 

• Pillar 1: Purpose, Vision and values. Key to understanding the overarching position and values of the firm, for leadership and for the commitments the firm has made - both internal and external. It includes how a firm works with other associations and how it’s helping to rebuild public trust. 

• Pillar 2: Accountability and disclosures. Concerned with delivery against objectives and targets, including what data is collected and why, and also how that is communicated to internal and external stakeholders. 

• Pillar 3: Investing in and Valuing People. Examines the types of policy and process in place, why those channels have been chosen and the extent to which employees are being brought along the journey.

How professional fund investors use ACT

Many firms and people across the industry were consulted in the development of ACT. It is agile and flexible; it fits different relationships as a useful tool, and firms of different types and sizes can access and utilise it. 

Depending on structure, size and resourcing, fund analysts and gate keepers are look for different ways to bring information in to support their decision making and risk mitigation process. 

• Screening – is the firm a Signatory and when did they sign up?  

• Reporting on impact - Firms communicate which of their asset managers are signatories and % of assets held by signatories

• Analytical integration - incorporating the questions into their analysis 

• Raising the bar – requiring ACT Signatory status for buy lists. 

How investment managers use ACT

The ACT Mark is a symbol of trust that an asset manager has undertaken a third-party independent activity focused on transparency and accountability.  It publicly demonstrates an understanding that clients must consider firm culture when assessing risk and values alignment.

• Discussion: ACT enables better conversations with clients, understanding they need to analyse and mitigate risk

• Connection: ACT helps connect the business, from sales and marketing through to fund and RfP teams

• Accountability: ACT disclosures are a track record of commitments, resourcing and responsibility

• Status: Showing ACT status helps demonstrate higher standard in investment process

What culture can tell us about a firm 

Disclosures are an opportunity for asset managers to demonstrate:

Good work: Good investment practice needs the right environment to make good decisions, from initial horizon scanning, innovation, analysis, risk assessment, confidence and judgement. 

Environments that are closed to new ideas, perspectives and contributions are not best placed to meet emerging challenges and opportunities.

Good leadership: Creating an environment that is inclusive supports productivity and effectiveness in the workplace. Done well it signals a well-organised approach to a strategic business issue.

Companies should be able to demonstrate that their approach has clear objectives, is being well resourced and has accountable senior leaders keeping it on track. Scattergun approaches to awareness raising initiatives should be moving into the past.

Good people: People that understand the company values and how the company values them can focus on doing a good job, work better in teams and be advocates for the company externally and internally. 

This helps to create a positive reinforcement cycle that strengthens the business - and is a good advert for it.

Additional FAQs

What is the Stewardship Council?

The ACT Framework is governed by industry experts from across roles and types of firm. These key stakeholders help us to calibrate our approach to ensure we are reflecting their key interests and concerns in the framework, and current practice.  

What is the Global Leadership Council?

The Global Leadership Council is comprised of business stakeholders that are growing the reach and impacts of ACT across industry, strengthening its utility. 

How can firms talk about Signatory Status?

Firms can use the ACT Mark on websites, in email signatures, in impact reports, factsheets, regulatory disclosures and at events. Signatories are provided with wording that they can use to talk about why they are a Signatory and what ACT is.

How are Signatories supported? 

Signatories benefit from expert support through the ACT Guidance, the ACT Trends Report, all the thought leadership from the City Hive team and access to the City Hive Academy for all employees. 

The partnership with Door

The due diligence platform Door is part of the ACT Alliance, which is made up of organisations across the investment ecosystem that believe in the importance of promoting good corporate culture. They support ACT by acting as the platform for reporting and disclosure, and critically by providing that track record of data that, as we will see, clients are really interested in.