Integration Across Asset Classes
Engagement through Encouragement, Non-Governmental Organization (NGO) Collaboration and Proxy Voting
As a founding signatory to the United Nations’ Principles of Responsible Investing or PRI since 2006, the UNJSPF incorporates environmental, social and governance (ESG) considerations throughout the investment decision-making process.
For internally managed equity and fixed income portfolios, OIM created a robust five-stage process that is tailored around PRI’s recommended integration for security analysis and valuation. This framework includes additional unique features constructed and optimized for OIM’s custom ESG requirements for internal and external investments respectively:
- ESG Index and Universe Screening: Reputational risk management and controversies screening individual companies radar
- Portfolio Analytics: Carbon foot-printing, customized controversies screening, stranded asset analysis and Sustainable Development Goals (SDG) impact analysis
- Robust ESG Metrics Database: Sourcing and consolidating material ESG data points to enhance fundamental and valuation analysis, both ex-post and ex-ante
- Company Analysis: Qualitative and quantitative peer analysis on company and prospective holdings integrated into investment rationale and company risk due diligence
- Corporate Engagement: ESG material summary conclusions validating quantitative and qualitative empirical conclusions from corporate one-on-one engagements reconciled to proxy voting action and corporate strategy
OIM’s external advisors for private markets integrate a comprehensive analysis of ESG issues into their due diligence process. The due diligence process includes a robust review of an investment sponsor’s commitment to and implementation of ESG principles.
During the planning and due diligence process, the OIM Alternatives Team and their respective advisers requests the completion of an ESG questionnaire for prospective investments. An internal ESG review occurs in the later stage of our investment process and is critical in the final analysis when presented at the internal investment committees
OIM began its ESG journey by restricting investments in tobacco and armaments, and has expanded our focus so that each asset class maintains a core ESG assessment covering fundamental, valuation, risk and due diligence analysis. In 2019, OIM also committed to divest from investments in publicly-traded companies in the coal energy sector by 31 December 2020. Additionally, OIM shall not make any new investments in the coal energy sector across all asset classes.
A key part of our approach to sustainable investing is the belief that portfolios which integrate material ESG metrics in their investment rationale have the potential to provide returns that are superior to those of conventional portfolios, while exhibiting lower risk over the long term. This view is supported by academic research and literature. More information on our approach to sustainable investing can be found in our 2018 Report on Sustainable Investing: