Provide an example per asset class of your benchmarks, objectives, incentives/controls and reporting requirements that would typically be included in your managers’ appointment.
Customized ESG benchmark tilting world equity index to lower carbon emissions, higher green revenues and zero fossil fuels
Incentives and controls
Provide additional information relevant to your organisation's appointment processes of external managers.
The majority of listed equity investments are held in pooled funds, where the assessment of ESG and responsible investment is made at the selection (and later monitoring) stage, with appointment documentation more necessarily based on the standard terms of the pooled fund.
However, during the reporting period we agreed to move our large passive equity component to a customised separately managed account with the agreed ESG integration (low carbon methodology, ex fossil fuels and related reporting) a key part of the appointment. This section (SAM 7) applies to this appointment decision.
We would typically take this step in listed equities in the majority of cases where the structure of the product allows – e.g. in all separately managed accounts, where ESG customisation to meet our objectives would be expected to be a key factor in investing in this manner. It is not done in the majority of all listed equity appointments when we also consider the pooled funds, where we instead have a thorough selection process.
We also invested in a new emerging markets equity fund during the period integrating ESG and explicitly excluding fossil fuels. While this is a pooled fund, we were the anchor investor and played a key role in the design of the product. These specific ESG requirements were therefore included in fund documentation.