Sixteen UK pension funds with assets over £200 billion (€267 billion) have published a responsible investment guide to increase accountability and transparency between asset owners and their investment managers.
The guide is meant to support pension funds’ wider efforts to include environmental, social and governance (ESG) investment in fund manager selection and monitoring processes, including requests for proposals, manager searches, due diligence and investment mandate terms.
The publication is called A Guide to Responsible Investment Reporting in Public Equity and the group hopes other pension funds will use it.
The group – which includes large local authority pension funds and private sector schemes – believes better reporting of ESG data and stewardship activities in public equities could help better determine how ESG factors contribute to long-term risk adjusted returns.
Daniel Ingram, head of responsible investment at BT Pension Scheme Management, says: “We encourage public equity fund managers to use this guide as an opportunity to take a step back and reflect on their approach to responsible investment. We ask the portfolio managers in particular to share with us their valuable insights on responsible investment at both the portfolio and stock level.”
While some of the specific reporting expectations will be more relevant for some investment strategies and styles than others, the guide provides fund managers with a set of emerging best practice standards in reporting for responsible investing.
The guide is divided into two parts, covering ESG integration and stewardship.
The group says it regards stewardship activities as a core requirement for both passive and active public equity managers.
Dawn Turner, head of pension fund management at the Environment Agency Pension Fund, says pension funds want “good quality, meaningful reporting” from fund managers and that the guide provides an “excellent tool to make real progress”.
Mark Chaloner, assistant director (investments) at West Midlands Pension Fund, says the guide sends a “clear signal to the marketplace as to what asset owners expect regarding their responsible investment reporting from fund managers of listed equity”.
David Styles, director of corporate governance at the Financial Reporting Council, the UK’s independent corporate governance regulator, welcomed the publication.
Other pension funds supporting the guide include Merseyside Pension Fund, National Employment Savings Trust, the Northern Ireland Local Government Officers’ Superannuation Committee, and USS Investment Management.
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