USS's Statement of Investment Principles is applicable across all assets and "requires its investment managers to integrate all material financial factors, including corporate governance, environmental, social and ethical considerations into the decision making process for all fund investments." This is supported by additional text in the scheme's Investment Beliefs. Both these documents are available on the USS website - www.uss.co.uk.
As by far the majority of the scheme's assets are managed in house by USS Investment Management, the core focus for RI activities has been internal assets, as reflected in the scheme's RI strategy.
That said, RI processes have been developed covering the appointments and monitoring of public market equities and fixed income asset managers, hedge funds, property, cash and private equity managers. The public manager appointment process is explained in more detail below, with other processes outlined throughout the SAM section.
Public Market Fund Manager Appointments
The RI team at USS Investment Management typically undertakes RI due diligence for all new external fund manager appointments. The appointments & investment due diligence for public markets are undertaken by the Strategy Coordination team (StratCo).
The typical process is as follows:
- StratCo provides their recommendations and materials to the RI team relating to the public market mandate manager / managers.
- The RI team undertakes a desktop review of publicly available material - from the manager itself, the PRI (for the assessment reports) or other sources.
- The RI team identifies areas that require further investigation / clarification across key RI areas below.
- The RI team contacts the asset manager, issues a template due diligence questionnaire and, holds a meeting with relevant people.
- The RI team drafts Due Diligence Note, providing summary of views and research to StratCo.
- Where a fund manager falls short of USS's expectation on RI, StratCo is informed and the appointment process may be terminated subject to StratCo's view.
The key areas of diligence undertaken by the RI team cover the following areas:
- ESG/RI/Stewardship Policy/ies
- Communication and Transparency
- Stewardship governance and management
These areas of diligence continue to feed into the monitoring and oversight of external managers, as outlined in the forthcoming SAM sections.