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Redington

Service Providers Framework 2020

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

Redington's mission is to help make 100 million people financially secure. We believe that Responsible Investment over a long-term time horizon is well aligned with this mission statement. A sustainable financial system and stable environment (political, social and physical) is a key to achieving widespread financial security.

As a mission-oriented and independent firm we are not attempting to solely maximise profits. We are aiming to build a sustainable business that will ultimately have a global footprint. Redington aim to be the leading full service investment consultant for Responsible Investment and we have a goal to align our investment advice with the transition to a low carbon economy. With this goal in mind our Investment Strategy Committee is currently exploring the ways that investment can support the Paris Agreement and contribute to the changes that need to be made to limit global temperature rise this century well below 2 degrees Celsius above pre-industrial levels. In this PRI report we detail the steps that we have taken so far including working with our clients to develop investment principles, scenario analysis, manager selection and reporting.

We feel that our core values underpin the way that we work with clients and create a strong platform for Responsible Investment. In order to incorporate ESG factors into our business offerings it is important to do what's right (do the difficult thing even if it entails extra work or is a message people don't want to hear); strive for better (fully incorporating ESG factors requires change from the status quo); and finally to focus on what matters by being clear in our communications with Redington employees, clients, asset managers and the rest of the industry about our expectations.

01.2. Indicate whether you have policies that formalise the incorporation of your ESG beliefs in your business offerings.

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

01.4. Indicate how these are put into practice internally across the organisation.

01.5. Additional information [OPTIONAL]


SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

02.2. Additional information. [OPTIONAL]


SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

Asset class specific guidelines detail whether we believe that ESG integration; reporting of ESG factors; and engagement on ESG issues is possible in the asset class.

RI guidelines and implementation plans can be developed in conjunction with the client and are comprised of two parts:

1. A description of the client's RI beliefs (which can be shared publicly)

2. An internal document which includes detailed information on asset classes and implementation. This document is used by the client and the consulting team to inform Asset Allocation decisions.

03.3. Additional information. [OPTIONAL]


SG 04. ESG/RI in business offerings

04.1. Briefly describe how you include ESG/RI factors as part of your business offerings.

Business area

Investment Consultancy

How you include ESG/RI factors

We use a framework that we call ROSIE (research, objectives, strategy, implementation, evaluation). We integrate ESG into this framework as described below.

Research: survey key stakeholders, carry out training, and run workshops if necessary to determine Responsible Investment beliefs. 

Objectives: translate RI beliefs into measurable, achievable objectives.

Strategy: incorporate RI beliefs & objectives (eg desire to allocate to sustainable assets or decarbonise) into the Strategic Asset Allocation model. Carried out where we know that a client has a stated objective.

Implementation: assess the approach of asset managers to managing ESG risks (in all asset classes). The Manager Research team's relative assessment of an asset manager's capability to manage ESG risks is a key selection factor when picking a Preferred Manager.

If a client has a stated ESG objective, where possible, we work with asset managers to include RI requirements in the contract between the asset owner and asset manager.

Evaluation: assess the ESG credentials of asset managers in our ongoing maintenance research and we utilise PRI ratings as a key discussion point. If clients have a stated ESG objective we are able to work with asset managers to find metrics against which the asset manager's performance can be evaluated.

04.2. Indicate the roles in your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for ESG/RI within the organisation.

Roles present in your organisation
Oversight/accountability for ESG/RI
Implementation of ESG/RI
Board
Directors
Chief Executive Officer (CEO), Chief Financial Officer (CFO)
Chief Operating Officer (COO), Chief Information Officer (CIO)
Other chief-level staff
Other heads of department

Please specify

          Head of Manager Research
Head of Investment Consulting
        

Please specify

          Head of Manager Research
Head of Investment Consulting
        
Dedicated ESG/RI staff
Other role, specify (1)
Other role, specify (2)
Other role, specify (3)
None of the above

04.3. Indicate how you ensure ESG/RI expertise for the roles where there are RI oversight/accountability or implementation responsibilities.

04.4. Indicate whether your organisation has any ESG/RI linked incentives for its employees.

04.5. Describe the ESG/RI linked incentives.

ESG is included in the performance objectives of relevant members of staff through our performance management system Clear Review. The objective may be temporary or permanent depending on the nature of the work being carried out.

Compensation at Redington is determined by 4 key contributory factors including performance, contribution, behaviour and personal growth. Also considered is how aligned the individuals are with our values, information provided by their team leaders and how they have met key performance indicators throughout the year.

Clear Review is our continuous performance management and feedback system which records all of this information used in our pay/ promotion discussions. Bonuses are discretionary and dependent on company and individual performance.

04.7. Additional information [OPTIONAL]

In 2019 the Redington Investment Strategy Committee approved the adoption of the Prudential Regulation Authority (PRA)’s Climate Stress Tests for Life Insurers. All model portfolios are now assessed against the following climate scenarios: a sudden and disorderly ’transition, a long-term orderly transition and a “hothouse” scenario assuming no transition to a less carbon-intensive economy. 


SG 05. Outsourcing of services

05.1. Indicate whether you outsource some of your services. Report percentage of services outsourced as percentage for that specific business area.

Business area

SG 06. Providing training/education

06.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

06.2. Describe the main components of your training/educational services on ESG/RI and any variations depending on the group you provide training/education to.

Sessions are usually structured in two parts, beginning with teaching on the key areas of focus followed by an interactive session where Trustees are able to explore concepts in more depth and to develop their own beliefs on a topic. We carry out training on the following main areas:

- Introductory training on ESG and stewardship concepts. This training is usually provided when a Trustee board is reviewing RI beliefs or agreeing RI beliefs for the first time. This session covers basic definitions, regulatory requirements, and a high level introduction to ESG in different asset classes. A large proportion of the session is devoted to an interactive workshop which enables trustees to develop their beliefs and to reflect on their Statement of Investment Principles. 

- Regulatory requirements for pension schemes. Regulatory compliance is a key area of training provided to our clients. We educate our clients on the aims of regulation, the impact on the scheme and its members and the actions that the trustees must take.

- Climate risk. Training on climate risk covers a basic background to climate science and to the goals of the Paris Agreement. We then explore the impact on investment decision making and the action that trustees can take to protect their investments and also to contribute to the transition to a low carbon economy. Finally we discuss reporting standards such as the TCFD.

- Asset class specific training. All asset class training includes more technical training, covering the fundamental characteristics of the asset class, why we believe it is appropriate for the scheme and how it complements the existing investment strategy, as well as the ESG characteristics of the asset class and how we expect asset managers to integrate ESG.

06.3. Describe whether these training/educational services include any commercial elements.

          Education of this type is typically provided as part of our fixed fee services for retained clients. For project clients a fee may be fee incurred.
        

06.4. Additional information. [OPTIONAL]


SG 07. Applying, advancing and promoting the PRI principles

07.1. Describe how your organisation applies, advances and promotes the PRI Principles.

1. We support clients to make ESG statements in their Statement of Investment Principles more robust, practical and implementable; we critically assess the capabilities of Asset Managers to incorporate ESG issues in every asset class we research.

2. In line with the updated occupational pension scheme investment regulations and the UK Stewardship Code 2020 we view engagement as engagement with Asset Managers on their approach to ESG, as well as engagement with underlying companies on ESG issues. 

3. In summer 2017 we carried out a review of the reporting that asset managers with whom we have a mutual client were able to provide. As a result of this review we have implemented MSCI ESG Manager and produce reporting using this tool for equity asset classes and corporate debt as well as continuing to request ESG reporting from asset managers. We review this partnership on a periodic basis. 

4. We include questions relating to the principles in our RFP questions to managers and during face-to-face manager meetings. Where we carry out Manager Reporting for our clients we ask Asset Managers to provide their PRI rating (if a signatory). If they are not a signatory we ask them why, and we review their RI statement against the principles. 

5. We support and participate in PRI working groups - specifically Christoforos Bikos has been appointed to the Fixed Income Advisory Committee.

6. We are positive about reporting to the PRI and we are looking forward to receiving feedback on our progress. 

07.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

Redington would like to engage with the PRI. In particular we would like to engage on the following topics:

  • Reporting by Asset Managers and Investment Consultants to Asset Owners
  • Manager research
  • Defined Contribution Pensions Schemes
  • Fixed income
  • Aligning long term interests with asset manager incentives
  • Climate risk as a systemic risk for long term asset owners
  • Impact investing
  • Communication with retail investors and pension scheme members on ESG characteristics of their portfolios

SG 08. Actions taken to promote responsible investment

08.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

08.2. Additional information. [OPTIONAL]

  • Redington provides RI education for clients.
  • The Redington Manager Research team engage with Asset Managers to encourage better transparency and disclosure of RI practices. The findings of the team are passed on to our clients.
  • Redington employees have spoken publicly at a number of events and conferences about our approach to RI.
  • Redington encourage the adoption of the PRI through publicly stating our membership and explaining to clients and managers the obligations of the PRI.
  • Redington have written a number of articles on RI which have been published widely.
  • We have carried out inhouse research during 2019 into climate risks and opportunities (not published)
  • We continue to interact with policy makers and the regulator (specifically tPR, DWP, FCA)

SG 09. Long term trends

09.1. Indicate which of the following long-term trends are addressed in your product outputs.

09.2. Explain how this long-term trend affects your product outputs.

Redington's Investment Strategy Committee (ISC) has recognised climate change as a systemic risk to investment outcomes. As such, the ISC has commissioned the research team to look into the following investment aspects of climate change:

- Risk

- Impact 

Risk
Redington's second risk management principle is that "risks still exist if you don't measure them, but risks can only be controlled if you do measure them". This is the key principle that we bear in mind when we consider climate change: we believe climate change poses a systemic investment risk and therefore we wish to measure it to the best of our ability so that our clients can use this information in their decision-making process. With this in mind in 2019 the ISC approved the adoption of the Prudential Regulatory Authority (PRA)'s Climate Stress Tests for Life Insurers. All model portfolios are now assessed against the following climate scenarios: a sudden and disorderly transition, a long-term orderly transition and a "hothouse" scenario assuming no transition to a less carbon-intensive economy.

Impact

Redington's Manager Research Team assess ESG integration, including assessment of climate change during investment due diligence. In addition, research is being carried out in 2020 to assess all asset classes for their ability to have impact on the transition to a low carbon economy. Research will allow the Investment Strategy Committee to set diversified model portfolios which deliver both a measurable climate impact and market rate returns.

 


SG 10. Interaction with asset owners

10.1. Indicate whether you interact with asset owner clients.

10.2. Indicate the typical frequency and type of interactions with your asset owner clients.

Type of interaction

Frequency

Frequency

Frequency

Frequency

Frequency

10.3. Additional information. [OPTIONAL]


SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

Redington's mission is to help make 100 million people financially secure. By its nature this is a long term goal. We feel that this mission is well aligned with a sustainable approach to investing over the long term and also with the obligations of our clients to meet their financial obligations.

We believe that Redington's mission means that we are well aligned to the overall philosophy of our clients. However, we recognise that the strategic goals and needs of individual clients vary, and the objectives of the client always determine our starting point when giving advice. As a goal-oriented consultant a key part of taking on a new client is to understand their strategic objectives and investment beliefs - both RI related, and holistically.

11.2. Additional information. [OPTIONAL]


SG 12. ESG recommendations not aligned with investor goals

12.1. Describe what steps you take, if any, when your ESG recommendations are not in line with your investor clients’ goals.

The Redington Asset Manager Selection and Monitoring process takes ESG risks and opportunities into account when forming a recommendation regardless of whether or not this is explicitly requested by the client. Therefore all clients receive a baseline level of ESG recommendation.

All our recommendations are tailored to individual client needs and therefore our advice should always, by implication, be aligned with investor goals. We are known for both being practical and 'getting things done' as well as helping clients to make better and more disciplined decisions. We feel that it is important to give clients the tools to help them feel smarter, build their capabilities, and ultimately give them the framework to make better decisions. Thus, in the rare circumstance that an initial recommendations is felt not to be in line with investor goals we take steps to offer education, seek new solutions, and to prioritise the important over the urgent.

12.2. Additional information. [OPTIONAL]


SG 13. Seeking feedback from clients

13.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

13.2. Describe how you use this feedback in your RI/ESG services and product offerings.

We seek feedback from clients on all of the work that we carry out. We believe that this is an important way to improve the service that we provide.

We carry out a systematic appraisal (usually annually) with all of our clients to collect feedback on the work Redington has carried out. We work with clients to design a mandate specific review template. This feedback is used to assess the performance of the team who work with the client and to identify areas for improvement.

In addition to this formal review mechanism we also elicit feedback on a more ad hoc and informal basis. Regular and immediate feedback is particularly important when developing new services or offerings.


SG 14. Managing conflicts of interest

14.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

14.2. Describe how you manage potential conflicts of interest.

As an independent, advisory-only, investment consultant with no ancillary business lines we are committed to ensuring that all aspects of the service our clients receive is conflict free.

We have a conflicts policy in place to anticipate and manage potential conflicts of interest. In summary, the policy states that we are committed to identifying, monitoring, and managing all potential conflicts.

14.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

Our legal and compliance team have systems and policies in place to ensure that employees do not derive any personal gain from the use of information collected during Redington's work process. These include (but are not limited to) a policy for personal accounts dealing and systems to detect information being sent from Redington email addresses to personal email accounts.

14.4. Additional information. [OPTIONAL]


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