As per the Investment Policy Statements, some managers are contractually obligated to adhere to the NEI Responsible Investment Policy. In addition, all manager contracts also state that NEI retains the right to vote all proxies in house and conduct independent or joint engagements with companies in the NEI mandates. If a manager does not comply with the above, the first step is to reach out to the manager to given them a chance to review their actions, as a last resort of non-compliance, the manager may be terminated. Non-compliance is considered a breach of contract and therefore can lead to termination of the relationship.
In addition to the manager’s ESG integration, NEI conducts an ESG evaluation of each holding in its portfolios. We recognize that each investment manager has a set of beliefs on responsible investing and varying levels of tolerance on those beliefs. As a result of our secondary ESG evaluation, we may require that a company is excluded from the NEI segregated mandates. As such, in the appointment of managers, we review the manager’s ability and skill in incorporating NEI’s ESG screens and ESG exclusions. As a result, we review and/or work with potential managers to build a process whereby our internal ESG team can collaborate with equity analysts and portfolio managers on ESG risks to create a suitable list of excluded securities.