ESG factors have to be considered when due diligence is performed on a manager. An ESG signoff is required at the investment committee level. The signoff is part of an integrated process that requires investment proposals to elaborate on ESG impacts of the investment, including an assessment which can be unconditional, conditional or negative.
APG's Responsible Investment Team (GRIG) is responsible for reviewing each investment proposal based on these criteria and engaging with the relevant portfolio managers or external fund managers in order to form an opinion on the ESG quality of the proposal. This may sometimes include a request by GRIG staff for further documentation, the adoption of an ESG policy framework, an ESG reporting requirement or other relevant additions that would satisfy our Responsible Investment Policy and would facilitate efficient ESG monitoring. An ESG opinion is also necessary in the pre-investment phase and leads to a formal signoff that is required for each investment proposal to continue being accepted by the relevant investment committees. Regarding ESG monitoring during the life of an investment, Responsible Investment Team members are regularly involved by portfolio managers to engage with external fund managers on relevant ESG topics within the portfolio.
Additionally, we frequently require newly appointed fund managers to report on ESG matters (either with reference to a particular industry standard or international standard) and to perform environmental and social impact assessments upon our request. Reporting in such cases is usually on an annual basis (though more frequent reporting can be required depending on the type/geography of an investment). However, it is the frequent contact between portfolio managers and external fund managers throughout the year that facilitates proper monitoring of relevant ESG issues and timely responses to possible ESG related incidents or discrepancies of the external manager.