Responsible investment considerations are formally integrated into Frontier’s investment manager assessment, monitoring and engagement processes. The objective of integrating responsible investment in Frontier’s investment manager research effort is to positively impact long-term investment outcomes by identifying, assessing and communicating the relative credibility and capabilities between investment products with respect to ESG. Manager research is primarily undertaken by Frontier’s Research Teams as the materiality of ESG factors will differ across asset classes and types of investment product. Where relevant, a Research Team may draw on externally-produced responsible investment intelligence to supplement its proprietary analysis. Under Frontier's current process, each product is assigned one, three or five stars which communicates the Research Team’s summary view on the investment manager’s capability in responsible investment relative to its peers.
The number of stars assigned correspond to the following definitions:
- One Star: no or very weak ESG consideration in the investment process.
- Three Stars: ESG considerations are broadly in line with peers.
- Five Stars: the manager is above peers in considering ESG in its investment process.
Responsible investment considerations are formally incorporated into annual reviews of investment products. The objective is to review, update (as required) and/or re-confirm the Research Team’s current assessment of the investment manager’s responsible investment capability with respect to the product. A focus of the review is to document the evolution of the investment manager’s responsible investment approach over the prior 12 months. The review also accounts for the evolution of responsible investment integration in the product’s peer group over the same period to determine the Manager’s relative level.
Responsible investment considerations are also integrated and recorded where relevant within investment manager interactions outside the formal annual review cycle, e.g. update meetings, ESG surveys.
Research Teams actively engage with investment managers on an ongoing basis to encourage improvement across all facets of their operations. This formally includes the integration of responsible investment considerations. The objective is to have investment managers continually deliver progressively better services to Frontier’s clients over time.
As part of the ongoing monitoring of investment products, the Research Teams document their responsible investment engagement activities over time. The relative progress of such engagement activities for a given investment manager compared to peers may ultimately impact the number of stars a product is assigned for its responsible investment capabilities.
Frontier is currently in the process of developing a more robust, transparent and structured ESG assessment framework which is expected to be in use before the end of 2020.