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Cambridge Associates

Service Providers Framework 2020

You are in Investment Consultancy » Manager selection and monitoring

Manager selection and monitoring

IC 12. ESG in manager selection, appointment and monitoring

12.1. Indicate whether you incorporate ESG factors into your manager selection and monitoring services.

Manager selection service

Manager monitoring service

12.3. Additional information. [OPTIONAL]

The emphasis on ESG factors in manager selection and monitoring can vary, given the totally customised approach taken to every client portfolio. In some cases, for clients with very specific ESG requirements (e.g. ethical screens, a fossil fuel divestment policy, or a client mandate dedicated to impact investing) it is explicit and central. However, in all cases ESG is incorporated since it is systematically considered within our investment research process. A major project in 2018 and 2019 further enhanced the systematic collection of ESG data on managers across all asset classes. We added more data analysis on factors including climate change and stewardship.


SELECTION

IC 13. Manager selection activities

13.1. Indicate what activities you undertake during the process of selecting a manager.

Research and screening

Strategy

ESG people/oversight

Process/portfolio construction

Selection process and reviewing documentation

13.2. Indicate whether you use any of the following scores or targets in your manager selection process.

13.3. Additional information. [OPTIONAL]

The emphasis on the various considerations above will always be client specific, given our selection work is always tailored. It will also varying across asset classes.

 

While we will often review UN PRI reports, especially for ESG/RI specialist managers, it is not a core part of our process given the strong direct access we have to investment managers to evaluate ESG issues and our own detailed ESGF due diligence data collection.


IC 14. Incorporating asset owners’ investment principles in selection of manager

14.1. Describe how you incorporate asset owners` investment principles into the manager selection process.

          Incorporating asset owners' investment principles into the manager selection process is fundamental to our firm's entire client offering. We do not offer off-the-shelf investment solutions or funds-of-funds and we do not have fee arrangements with investment management firms. 

Our manager selection work is therefore independent and customized to meet the needs of the particular client. Incorporating our asset owner clients’ own investment principles into manager selection is a case in point that illustrates our unique value proposition to our many clients. We are able to strongly emphasize ESG/RI and alignment with their principles in a customized manner. No two asset owners principles and beliefs are the same. We therefore believe that this independent and customized approach stands out and differentiates our offering.
        

14.2. Additional information. [OPTIONAL]


IC 15. ESG in selection due diligence

15.1. Briefly describe how you include ESG factors in your due diligence process for manager selection.

          The information provided in the previous Investment Research and Manager Selection and Monitoring sections largely answers this question.

Any manager selection process will draw on our deep ESG investment research capabilities, while being tailored to the specific investment policy and goals (including related to ESG issues) of the client in question. There is no single ‘recommended list’ or score for ESG managers, since all clients have different needs on ESG. Our manager selection work considering ESG factors spans all asset classes and extends from simple negative screens on passive equity allocations through to a deep impact investing research platform.

We have specific ESG resources to help manager searches with regard to specific client ESG issues. For example, we maintain a database of fossil fuel free investment strategies for clients pursuing a policy of fossil fuel divestment. Our manager database has search functions based on a number of ESG attributes and datapoints for underlying managers. We will also use quantitative ESG data tools to screen managers for compliance with other specific client polices (e.g. negative screens).

Finally, the fact we have a large number leading ESG/RI practitioners among our client base gives us the scale to help drive new ESG solutions where the manager selection process reveals a gap in the market of suitable products.
        

15.2. Additional information. [OPTIONAL]


IC 16. Monitoring investment managers on ESG

16.1. Indicate whether you set any of the following to measure compliance/progress, or use the following information to review and evaluate the investment manager.

Setting measures for the investment manager as part of the monitoring process

          We have developed our own framework for impact reporting when monitoring impact investing strategies.
        

Reviewing and evaluating information from the investment manager as part of the monitoring process

16.2. Describe how you raise and manage concerns when monitoring investment managers on ESG factors.

          Our monitoring process is based around frequent direct interactions with managers. Our scale gives us strong access to our managers. We would raise such issues directly with managers.
We have frequent dialogue on issues such as voting, engagement and defining the parameters of ethical exclusions. Our direct access to managers means we generally access ESG information directly although our due diligence data collection also collects PRI reports for evaluation.
        

16.3. Additional information. [OPTIONAL]


IC 17. Reporting back to asset owners

17.1. Indicate whether you report back to asset owners on your manager selection and/or monitoring activities.

17.2. If yes, describe how you report back and the frequency.

          We maintain very regular dialogue with our typical asset owner clients on manager selection activities, culminating in their approval for advisory clients. This reporting happens frequently with investment teams between regular investment committee or trustee meetings, which are typically quarterly. Quarterly meetings will also cover monitoring activities. We also provide clients with quarterly manager monitoring reports on our research database.
        

17.4. Additional information. [OPTIONAL]


IC 18. Demonstrating value on manager selection, appointment and monitoring

18.1. Describe how you measure, track or otherwise demonstrate your value on manager selection and monitoring services.

          As we do not have our own productions and do not have “model” portfolios for our clients, the track record for our discretionary relationships is the purest form of our value added from manager selection, appointment and monitoring services as it represents decisions made fully be the Cambridge Associates investment teams.
        

18.2. Additional information. [OPTIONAL]


IC 19. ESG in manager selection, appointment and monitoring (Not Completed)


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