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United Nations Joint Staff Pension Fund

PRI reporting framework 2018

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You are in Strategy and Governance » Outsourcing to fiduciary managers and investment consultants

Outsourcing to fiduciary managers and investment consultants

SG 12. Role of investment consultants/fiduciary managers

New selection options have been added to this indicator. Please review your prefilled responses carefully.

12.1. Indicate whether your organisation uses investment consultants.

12.2. Indicate how your organisation uses investment consultants in the selection, appointment and/or monitoring of external managers.

Asset class

12.3. Indicate if your organisation considers responsible investment in the selection, appointment and/or review processes for investment consultants.

Asset class

12.3. Indicate if your organisation considers responsible investment in the selection, appointment and/or review processes for investment consultants.

12.4. Indicate whether you use investment consultants for any the following services. Describe the responsible investment components of these services.

Describe how responsible investment is incorporated

          The UNJSPF custodian/master record keeper (MRK) provides the following ESG capabilities for servicing the Fund’s assets:
-	Thought leadership and white papers
-	Low Carbon economic factor integration
-	ESG regulation alerts, global legislation status and “codes of practice” implementation
-	Managing quality factor investment to long-run sustainability of ESG practices
The UNJSPF custodian/MRK is an UN PRI signatory with a rating of X
        

Describe how responsible investment is incorporated

          The UNJSPF collaborates with interagency partners and benchmark service providers to assist in guiding best practices in investment policy formulation, such as PRI, UNEP FI and UNGC.
        

Describe how responsible investment is incorporated

          The Fund’s SSA non-discretionary advisor provides fully integrated ESG advisement to the UNJSPF, including:
-	Fundamental Research & Analysis
-	Portfolio Construction & Maintenance
-	Risk Management 
-	Active Ownership 
-	Socially Responsible Investing
-	White papers and ESG Reports
The UNJSPF SAA’s non-discretionary advisor is an UN PRI signatory with a rating of X
        

Describe how responsible investment is incorporated

          ESG is integrated across 100% of equity assets. See PRI integration recommendation.
        

Describe how responsible investment is incorporated

          As an active participant in the Global Real Estate Sustainability Benchmark (GRESB) and a signatory to the United Nations Principles for Responsible Investment (UN PRI), The Townsend Group is committed to engaging with the industry at large on sustainability initiatives and how they may impact real estate performance at the investment level.  

The Townsend Group recognized early on that ESG issues are important characteristics of investing in real assets. We collaborate with clients, investors and organizations to establish and monitor best practices around ESG issues. To date, we have been most active in analyzing ESG within the Property segment.   

The Townsend Group became a signatory to the United Nations Principles for Responsible Investment (UN PRI) on April 13, 2010. Shortly after becoming a signatory in 2010, Townsend joined the Global Real Estate Sustainability Benchmark (GRESB) as an Advisory Board member. In 2016, Townsend was influential in the launch of the GRESB Infrastructure initiative, which was formed in partnership with the team at GRESB. The GRESB framework provides systematic assessment, objective scoring, and peer benchmarking for environmental, social, and governance (ESG) performance of real estate, real estate debt and infrastructure  funds.  The GRESB framework can also be extended to pools of direct investments such as separate accounts. In October 2016, Jennifer Young Stevens (Principal of The Townsend Group) was awarded the GRESB Investor Leadership award by the US Green Building Council.   

An internal team was developed to lead this initiative in 2010 that consists of various members of Townsend’s global real assets team. The Townsend Group has taken steps to integrate a comprehensive analysis of ESG issues into its due diligence efforts and use its relationships and indirect or direct ownership positions to engage in dialogue with the entities in which our clients invest. All employees are responsible for raising the awareness of sustainability issues by asking questions throughout the due diligence process and sharing findings with others. Townsend also has an ESG supplement which accompanies its due diligence questionnaires and applies to all real asset classes.   

Townsend Investment recommendations are based on our extensive due diligence process conducted for all prospective investments.  The mandatory due diligence process includes a comprehensive review of all aspects of an investment sponsor.  This review is critical in the final analysis of the prospective investment when presented to our Investment Committee.  

As an advisor, Townsend monitors underlying real estate funds with varying ESG objectives and/targets.  We encourage General Partners to identify specific firm-wide ESG objectives in a publicly disclosed Responsible Investment Policy.  Though every Responsible Investment Policy will differ, Townsend seeks to understand if ESG is taken seriously by senior management (i.e. designated personnel and accountability) and how ESG initiatives translate to performance on an ongoing basis.

The Townsend due diligence process includes a comprehensive review of an investment sponsor’s commitment to and implementation of ESG principals. This review occurs in the later stage of our process and is critical in the final analysis when presented to our Investment Committee. In particular, the real estate sector has incorporated a variety of sustainability principals (energy and water efficiency, recycling programs, access to public transportation, etc.), especially in connection with new construction and value added investments that include building rehabilitation.  To the extent an investment sponsor is not considering these principles today, our due diligence team identifies the deficiency in our final due diligence report.

During the Planning and Due Diligence Process, Townsend requests the completion of an ESG questionnaire, which is a separate supplement to the Townsend Due Diligence Questionnaire.  The ESG Supplement is returned by Real Estate, Infrastructure, Timber and Agriculture General Partners engaged in full due diligence for a specific product offering and covers basic questions related to ESG within the organization and specific investment opportunity. For open-end fund investments, Townsend incorporates ESG in to its bi-annual investment reviews by way of questionnaires and inquiries during on-site meetings.

Due to the fact that there is a separate General Partner responsible for the execution of an underlying investment on behalf of a client, it is important to understand their framework for evaluating ESG at the asset level prior to execution. Several General Partner’s provide evidence of an “ESG Checklist” which is presented to Investment Committee prior to deal approval. Others may not have a specific framework for evaluating ESG prior to acquisition, but take in to account capital improvements, equipment upgrades, building certification and other items that will impact the performance of a project in the underwriting process. 

For clients seeking to incorporate ESG in to their overall investment process, Townsend would work to understand the specific investment and reporting criteria associated with ESG during the Strategic Planning process. For clients with an interest in ESG risk assessment and no current process, Townsend has been effective in advising clients how best to begin incorporating ESG in to an overall investment framework.  For clients with ESG mandates, Townsend partners with the Global Real Estate Sustainability Benchmark (GRESB) to provide portfolio analytics and supplement annual reporting.
        

Describe how responsible investment is incorporated

          StepStone believes that ESG factors can be significant toward the long-term value creation proposition of a portfolio, and consequently, drivers of investment returns. StepStone has integrated ESG factors in its investment process and considers it to be a core part of its mission to maximize risk-adjusted returns for its clients.
When considering a primary investment, StepStone looks at the manager's approach to ESG. This is reflected through the manager's track record, corporate culture, and participation in sustainability and ESG-focused organizations. Information accessibility can also illustrate accountability.  To that end, StepStone has created an ESG Committee.  The ESG Committee’s mandate is to develop StepStone’s ESG policy, approach to ESG analysis, advocacy and provide training across the firm. Importantly, the ESG effort is supported by the entire Partner group, across 16 offices in 11 countries, who all have responsibility for policy implementation. Research is carried out by the more than 150 investment professionals, who are organized by sector and geography to ensure broad and deep coverage of the private markets.
The team that conducts the due diligence is responsible for the fact finding through review of ESG data and sustainability reports. Each investment team has an ESG sector team leader, such that each of StepStone’s sector teams includes a research professional who is responsible for the oversight of ESG due diligence and monitoring across the sector team’s investment activity. The ESG sector lead drives ESG best practice in their respective vertical and engages with the ESG Committee. Every Investment Memorandum has a dedicated ESG section – these are reviewed by the ESG sector lead and ESG Committee. Then, as part of the investment process, the information is discussed in the Investment Committee meetings.  Our comprehensive approach to investment analysis looks to incorporates ESG considerations as part of the overall process. 
As shown above, ESG considerations are intricately woven into our investment process. All investments have ESG issues explored during due diligence which are then considered by both the ESG Committee and finally by the asset class Investment Committee. Hence, when an investment has been approved by the asset class Investment Committee, it means that ESG considerations have been opined upon as well. It is possible that through this process, certain investments do not proceed based on weaknesses in the investment team, their strategy or specific ESG issues. For example, StepStone considered an investment in an organization where there had been public concerns around discriminatory practices. StepStone looked to review the changes in the organization post these complaints – from training, hiring practices, whistle-blowing procedures, board composition, etc. Ultimately, StepStone did not proceed with the investment. In another instance, StepStone was reviewing a general partner focused on mining operations – this involved extensive evaluation of the manager’s approach to both community engagement, environmental assessment and procedures. StepStone will exclude investments that do not comply with the rules and regulations of the country in which they operate. StepStone will also exclude investments based on client requirements (e.g., no tobacco, gambling, etc.) 

StepStone is committed to being a responsible steward through its investments across sectors, geographies and investment strategies.  As such, ESG was swiftly integrated into our due diligence process upon becoming a signatory to the UN-supported Principles for Responsible Investment (“UN PRI”).  
The Firm remains an active participant through its annual reporting to PRI which details the implementation of the Principles.  This ensures the Firm’s accountability to the principles we have adopted, encourages transparency in disclosing our Responsible Investing (“RI”) activities, and helps us continue to develop and assess our RI policy and ESG program against objective metrics.
When StepStone is conducting due diligence on an investment opportunity, we look to see how the various ESG risks and opportunities have been evaluated by the general partner. As such, we expect this to be explicitly considered within the financials where relevant. For example, if we are reviewing a shipping investment then we expect the manager to have considered the cost of ballast water purification and potential for accelerated depreciation of vessels that do not comply. Alternatively, if we are reviewing an oil fracking opportunity, then we expect various costs around water management, land rectification to be included. These issues often become points of discussion with the general partner to understand how these issues have been included or not and why. 
ESG is one of the many factors that contribute to StepStone’s investment decisions.  During the due diligence process for primary funds, we ask a series of questions which address social and environmental impact, and the firm’s governance practices.  Examples of questions include:
•	Please describe any programs in place at the General Partner or at portfolio companies that attempt to improve the impact on the environment (e.g., energy policies, paperless office, process improvements, carbon offsets, etc.)
•	Has any portfolio company been found out of compliance with laws or regulations governing disposal of hazardous waste or pollutants?  What steps has the General Partner taken to ensure such violations do not recur?
•	Please describe any programs in place at the General Partner or at portfolio companies that attempt to improve the impact on the community, either local or global?
•	Will there be an Advisory Board consisting of representatives from the limited partners with the ability to act as a check on the management of the fund?  If so, please define the standards of care and of indemnification of those representatives and describe the functioning of the Advisory Board, its composition and its selection criteria.
We also inquire if the manager is a signatory to UN PRI and whether an ESG policy has been implemented.
        

12.5. Indicate whether your organisation considers any of the following responsible investment factors in the monitoring of fiduciary managers

12.6. Describe the approach you take to monitoring your fiduciary managers and the reason(s) for this approach [Optional].

​Mandatory annual reviews of all vendor and RFP contracts to ensure compliance with SRI and ESG guidelines set forth in IPS statement. 

 

12.7. Additional information [Optional].


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