The Principles of Responsible Investment (PRI) has launched three guides for asset owners outlining how they can ensure ESG is systematically integrated into each step of their manager selection process.
The technical guides cover manager selection, appointment, and monitoring of third-party external managers.
“Asset owners play a key role in influencing the entire investment management industry, and providing them with tools, support and opportunities for collaboration is fundamental to the PRI’s theory of change,” said PRI CEO Fiona Reynolds (pictured).
“Asset owners must be empowered to challenge investment managers, uncover greenwashing, and trigger changes in practice across ESG integration and engagement. We hope that these guides support both large and small asset owners and their advisers to incorporate ESG factors into how they relate to, cooperate with and challenge asset managers.”
Firstly, the Asset Owner Technical Guide – Investment Manager Selection is for asset owners looking to address responsible investment principles and ESG factors in their relationship with investment managers. It comprises of five modules covering how to develop a responsible investment policy and strategy, the internal process of establishing mandate requirements with ESG considerations, manager selection and appointment from a responsible investing stance, as well as approaches for manager monitoring.
This guide also features an investment manager selection toolbox, which provides examples of core attributes asset owners should be looking for, ESG scoring methodology and scorecard examples as well as other potential frameworks for asset owners to use.
Investment Manager Selection Process
The second guide, Asset Owner Technical Guide – Investment Manager Appointment Guide, is focused on asset owners including ESG considerations in their investment management agreements (IMAs) and other legal documentation. Also over five modules, it gives advice on transferring mandate requirements into legal documents, agreeing terms and conditions between asset owners and investment managers, provides sample ESG clauses and approval processes, as well as tips on how to monitor the above once in place.
It also includes an investment manager appointment toolbox.
The Investment Manager Approval Process
Finally, the third new guide is called the Asset Owner Technical Guide – Investment Manager Monitoring, and highlights that “thorough and consistent monitoring is critical to ensure the delivery of the terms and conditions”, the PRI said. This monitoring will provide the asset owner with the necessary detail and insight to understand the manager’s approach and alignment to the mandate and agreements.
This guide’s five modules detail how to monitor managers through various disclosures and reporting formats, the frequency necessary, how the information is verified and the importance of regular reviews. The toolbox supporting this guide includes example disclosure tools.
Investment Manager Monitoring Process
View all three guides here.