For the roles for which you have RI oversight/accountability or implementation responsibilities, indicate how you execute these responsibilities.
Responsibility for ESG integration exists at several different levels:
- Laura Kunkemueller, ESG Officer, oversees the ESG integration practice across the firm. She works with each investment discipline to improve the way material ESG factors are recognized, incorporated and monitored. Her responsibilities include researching and procuring ESG data sources, creating and maintaining ESG protocols and coordinating thought leadership on ESG-related topics.
- Each research analyst for actively managed equity and fixed income is responsible for recognizing and incorporating material and relevant ESG factors into his or her investment thesis. This data might come from MSCI, Bloomberg or sell-side researchers' ESG-specific analyses, or from more traditional investment research sources. In addition, the MSCI report is attached to the research invitation for each meeting with company management. Consequently, anyone attending the meeting has access to the company-specific ESG information. Attendees are alerted to potential ESG issues with the company and can be prepared to address any ESG concerns.
- Portfolio teams managing systematic portfolios receive ESG data as part of their regular oversight. The majority of this data is based on MSCI's ESG module.
- In cases where clients are interested in creating bespoke ESG solutions, Mellon offers investment advisory services tailored to meet clients' individual investment goals. We work with clients to create investment guidelines mutually acceptable to both the client and the firm. When creating investment guidelines, clients may impose specific investment restrictions in certain individual securities or types of securities.
- For clients with exclusive screens, Mellon's Compliance department uses Charles River, a third-party automated compliance monitoring system, to hardcode the companies into restricted lists, which are then monitored by Mellon's Compliance department on both pre and post trade basis.
- For clients with environmental, social, and governance ("ESG") and/or socially responsible investing ("SRI") mandates, Mellon utilizes MSCI ESG Research, a third-party provider of ESG and business involvement data. In instances where clients request ESG and SRI restricted lists, these are generated utilizing MSCI ESG Research data and are then hardcoded into Charles River and monitored by Mellon's Compliance department on both pre and post trade basis. The criteria are monitored daily by Portfolio Compliance and clients are notified immediately if a change is made to their screen.
- For the Carbon Efficiency Strategy, the data is reviewed daily to capture any updates related to a company's carbon report.
- Portfolio managers for actively managed funds, both equity and fixed income, receive ESG data on their portfolios. Active Equity receives periodic portfolio profiles indicating the MSCI ESG score for each holding covered by the MSCI ESG module. These profiles are used to prompt conversation about concentrations and relative positioning. Active Fixed Income has developed a proprietary ESG risk score that layers a proprietary materiality determination over the MSCI ESG scores and sums the resulting scores to create a relative measure of risk.
Additional information. [Optional]
Mellon has made the deliberate decision to incorporate ESG throughout its investment processes rather than segregating these efforts in a separate team. By assigning responsibility for ESG integration to all investment professionals, we increase the opportunity for shared research, insights and discussion on ESG issues and trends. Further, the ESG Working Group, consisting of ESG Champions from each discipline review ongoing ESG efforts weekly.