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You are in Indirect – Manager Selection, Appointment and Monitoring » Outputs and outcomes
Addressing the lack of a formalised ESG policy by a listed equity manager
We have engaged with a newly appointed listed equity manager which, despite having a very strong focus on ESG matters, governance in particular, and a strong company engagement approach, lacked a formalised ESG policy and associated reporting.
The manager formalised its ESG policy which has a strong emphasis on climate change risk, being considered the most material risk to their portfolio. As part of its commitment, the manager set out its expectations for all portfolio companies to report to CDP annually and have a clear low-carbon transition plans in place. In addition, the manager has improved its quarterly reporting on ESG related issues and engagements.
Climate change data
Although integral to their credit selection process, the reporting around the climate change sensitivity at the portfolio level was lacking.
We have worked with the managers and the data provider (MSCI) to obtain carbon intensity scores for our credit portfolios, which are included in the 2019 Report & Accounts for the Scheme
PE manager appointment
Strong focus on ESG integration and stewardship in the manager selection process
Led to an appointment of a A+/A UN PRI rated private equity manager with long standing responsible investment credentials
Review of the composition of the equity portfolio
The Scheme's listed equity portfolio consists of active strategies, which integrate ESG in their investment approach, and passive strategies which incorporate ESG as part of the strategy methodology and implementation. The Scheme's passive value equity strategy was identified as a significant drag on the overall ESG quality of the listed equity portfolio as well as a meaningful contributor to carbon intensity
Following an extensive analysis, which assessed the ways the portfolio can be evolved, the passive value equity strategy was divested from and proceeds reallocated to active equity managers. This reallocation has had a positive impact on the listed equity portfolio’s overall ESG scores and carbon metrics