We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ. An example is one of our global sovereign fixed interest IMs assess ESG factors as part of their financial stability assessment for all countries. The IM believes that countries with better governance, healthier and better educated workforces, and higher environmental standards tend to product better economic outcomes, more stable balance sheets and better financial outcomes. ESG factors therefore impact valuations and inform their risk assessment of a country's sovereign debt. The IM penalises weak ESG factors, thereby reducing a country's financial balance sheet assessment, which is used as an input into the investment decision making process.