Currently, we practice the steps highlighted below for any ESG-classified managers/strategies our due diligence analysts cover, but this process has not been integrated across non-ESG classified managers/strategies on the platform.
1) Our approach to selecting ESG-classified investment managers is based on the manager’s ability to effectively integrate both Environmental, Social, and Governance (ESG) factors and traditional risk-return criteria into their investment selection and risk management approach.
2) Impact Criteria: The strategy integrates environmental, social or other governance factors into the daily process of investment decision making, portfolio construction and/or risk management. We use many data points and discussions with strategy providers to conduct this analysis, including MSCI ESG Ratings. Exclusionary screens can be used as part of the process, but are not considered a driving factor in selecting a strategy.
3) Risk and Return Criteria: The strategy has the potential to meet or exceed the risk and return profiles of “traditional” (non-impact focused) strategies in its peer group. The risk and return profile of the strategies are in line with the expected risk and return of the underlying assets given the social or environmental mission.