In addition to what is already being mentioned in Section SAM 08.1, Mercy is proactive in encouraging improved RI practices with existing investment managers. Mercy takes every opportunity during manager interactions to ask existing managers how they view, approach, and implement ESG into their investment process. Not all existing managers have ESG policy or implementation in place; however, Mercy engages the managers on the discussion of ESG regardless of where they currently stand.
With managers who have not given much thought on ESG, Mercy explains to the managers the importance of developing and fostering ESG awareness in one's portfolio and firm. Mercy often provides examples both from Mercy's internal ESG practices or from anonymous peers to allow a manager with no ESG practices in place to gain some insight and industry advice.
With managers who currently have ESG policy and implementation in place, Mercy learns about their best practices and shares with the managers what Mercy has been doing internally or has been observing from other managers in the space.
Mercy also encourages existing managers to promote their ESG practices to be recognized by more investors. For example, Mercy is an investor with an Opportunistic Debt Fund that finances affordable workforce housing building projects. Mercy's Director encouraged the portfolio manager to write an ESG white paper highlighting the impact of their fund in the workforce housing market, so existing and potential investors can see the social value that manager is able to generate in addition to the financial returns the manager is able to generate on a consistent year to year basis. This is an example of an emerging/smaller manager with limited ESG experiences or policies; however, they fundamentally incorporate ESG/impact in the assets they invest in and we encouraged them to bring awareness to other LPs.
During our China equity manager search, we made sure to stress to the managers the importance of ESG for our organization and discuss their approach within the investment process. Requested all Finalist Managers to fill out Mercy’s SRI Due Diligence Checklist and shared with them a UNPRI write-up on ESG within Asia. Discussed the SRI responses and went over specific investment cases during our final due diligence meetings; incorporated the manager SRI implementation in our internal China scorecard; and incorporated the SRI conclusions into the Investment recommendation mem. Some of the managers with no ESG policy in place, decided to look into and work on drafting ESG policies for their own organizations.