When considering a new external investment manager in any of our key asset classes HESTA, as well as our consultant or advisor will assess the prospective Manager's:
- Approach and policies to incorporating ESG within its investment processes and decision making, across all stages of its investment, including pre-investment, due diligence and post investment asset management.
- Processes to incorporate ESG within its investment processes and decision making across all stages of its investment, including pre-investment, due diligence and post investment asset management.
- Capabilities related to ESG including tools, resources, reporting as well as thought leadership and involvement in any external responsible investment collaborations and/or initiatives.
- Willingness to engage with HESTA and improve its capabilities and processes in the future.
The ESG assessment of a prospective external investment manager will only be one of a range of factors which determine the suitability of a manager and its strategy for inclusion in HESTA's portfolio.
HESTA's Manager ESG Assessment is undertaken predominantly by the relevant asset class team, with support from the Responsible Investment team. The Manager ESG Assessment is undertaken using our comprehensive suite of ESG criteria which cover the elements identified above and includes a scoring and weighting framework for each categrory and criteria. The Assessment is conducted through (i) a desktop review of the ESG assessment provided by HESTA's consultant or advisor, (ii) a desktop review of any documented ESG information e.g. policies, relevant questionnaires (i.e. GRESB, PE LP DDQ) reports etc, provided by the prospective manager and (iii) an ESG focused meeting with the prospective manager.
A manager's score in their ESG assessment is discussed among the relevant asset class team, consulting the Responsible Investment team as required. In cases where a manager is early in its RI journey, HESTA might still recommend an investment in the manager provided that there is willingness from the manager to engage with HESTA and improve its RI practices post appointment.
The results from the manager assessment are incorporated in HESTA's recommendation memo, which is reviewed by our CIO when approving an investment decision.
When appointing a new external investment manager in any of our key asset classes, ESG requirements are incorporated into contractual arrangements, either within an investment management agreement or a side letter.
HESTA shares the results from the Manager ESG assessment with external managers in a 'Feedback Pack' which includes manager's score relative to peers and their areas of strength and weakness. We use this 'Feedback Pack' as tool for engaging with managers and monitoring their progress in RI.
Additionally we include ESG questions in manager's meetings and discuss examples of how managers are applying the RI policies and processes at different stages of decision-making.
HESTA also holds ad hoc meetings/calls when there are specific ESG incidents.