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Frontier Advisors

Service Providers Framework 2020

You are in Investment Consultancy » Investment research

Investment research

IC 10. Investment research activities

10.1. Indicate whether you incorporate ESG into your investment research services.

10.2. Indicate whether the following activities are part of your investment research process. Describe for each activity how you incorporate ESG.

Investment research activities

Describe how you incorporate ESG

          On request, Frontier assists clients with investment research and due diligence on specific transactions, most typically in the real assets space, with respect to an infrastructure or property asset.  In such circumstances, ESG factors are formally considered as part of Frontier's due diligence on the deal sponsor/fund manager.  Please see further details on Frontier's approach to ESG/RI assessment of fund managers in section IC 12 - IC 19

Describe how you incorporate ESG

          On request, Frontier assists clients with the design of investment mandates which may include ESG/RI factors such as (but not limited to) minimum standards on ESG integration and reporting, selection of climate-aligned benchmarks or carbon intensity objectives.  Frontier will engage directly with the client to articulate such requirements in line with its specific needs.

Describe how you incorporate ESG

          On request, Frontier assists clients with the selection of ESG/RI-aware benchmarks.  In 2020, Frontier completed a research/information paper on the topic of climate-aligned passive equity indices.  A key thesis was that investors should clearly articulate their specific objectives around climate before identifying an index against which a manager can construct its portfolio.

Describe how you incorporate ESG

          Responsible investment research is primarily undertaken by Frontier’s Research Teams, reflecting the domain expertise required to effectively analyse ESG factors within specific asset classes/capital markets.  A Research Team may collaborate on responsible investment research with other business units including but not limited to, other Research Teams, the Responsible Investment Group, Client Teams and the Governance Advice, Risk, Decisions and Strategy Team, on an as-needs basis.  Where relevant, a Research Team may draw on externally-produced responsible investment intelligence to supplement its proprietary analysis.
Each Research Team formally reports on material responsible investment matters across all major asset classes/capital markets on at least an annual basis.  More generally, where deemed material, asset class/capital markets research reports will include consideration and analysis of relevant responsible investment issues.

Describe how you incorporate ESG

          At the delegation of Frontier’s Investment Committee, the Responsible Investment Group has primary responsibility to formulate and drive the responsible investment research agenda.  This process is continually informed by Frontier’s interactions on responsible investment issues with a broad range of industry stakeholders including clients, investment managers and responsible investment advocacy groups.

Given the large number and wide variety of ESG factors, the formulation of Frontier’s responsible investment research agenda also considers the materiality of these factors.  ESG factors expected to have a material impact on the long-term performance of client portfolios are prioritised for research.
Materiality in this context may variously refer to the expected scale of risk and/or opportunity, the prevalence of an ESG factor within the economy, and/or the degree to which Frontier assesses an ESG factor can reasonably be managed by clients.  

Frontier is further directed by the UN Sustainable Development Goals which in aggregate are viewed as providing tangible and detailed guidance on the likely evolution of development-related policies and capital funding requirements to achieve them.  Frontier focuses on those goals which it believes it can have a material influence on behalf of clients at a given time.

For the 2020 calendar year, Frontier will aim to further its ongoing, longer-term thematic research relating to climate change and modern slavery.  We have also identified a number of standalone thematic research topics for which the Research Teams will produce papers including the portfolio implementation considerations when divesting fossil fuels; private market opportunities in climate adaptation strategies; the investment thesis for specialist disability accommodation; the role of private capital in the just transition; and ESG-aligned corporate incentives - concept versus reality.

10.4. Additional information. [OPTIONAL]

IC 11. Demonstrating value on investment research

11.1. Describe how you measure, track or otherwise demonstrate your value on investment research activities.

          The measurement and tracking of Frontier's research value-add incorporates both internal monitoring and governance processes, as well as sourcing data/feedback externally from clients and industry bench-marking surveys.

11.2. Additional information. [OPTIONAL]

Frontier's internal monitoring and governance processes permit the measurement and tracking of Frontier's value-add in areas of research where quantitative data is readily available.  These would typically include Frontier's dynamic asset allocation positions (versus an internal long-term Model Portfolio), and the relative performance of Frontier's highly-rated investment managers relative to peers and relevant indices.

Frontier also relies heavily on feedback from its clients via regular, informal interactions, as well as via a formal Client Relationship Management process.  Such feedback is reviewed on an ongoing basis by Frontier's senior management, forming a key input into improving its overall research services.

Formal industry bench-marking surveys also provide Frontier with valuable intelligence with respect to the value-add it provdes to clients.  The most prominent of these is the Peter Lee Associates annual Investment Management survey which seeks the opinions on asset consultants from over 100 institutional investors.