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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]

We have integrated ESG in our manager research process and it is one of our 10 selection factors. The description of ESG advantage in our process is as follows: “The investment team takes account of ESG risk factors and acts on these when financially material; and there is buy-in at the business level”. We believe that ESG materiality is asset class and sector dependent. Therefore, a broad description of the ESG advantage allows us to focus on those areas with the highest impact within our preferred lists.

In order to ensure the consistency of our output we developed the following framework that works as an assessment guide:
1. Integration into investment process
2. Infrastructure
3. Engagement (stewardship)
4. Business focus & accountability

Beneath these four high level areas we have identified a number of evidence points that we look for.

Preferred managers are surveyed annually to ensure we capture any changes to their ESG risk management and integration processes. 


IC 13. Manager selection activities

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

Research and screening


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]

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.

          We work with each individual client on a bespoke basis. As part of our 10x10x10 research process we seek to understand and to describe to our clients the way that the asset manager treats ESG risk factors in their investment process. This allows Redington Investment Consultants to choose the appropriate asset manager or strategy to present to their clients. 

Thus Asset Owner principles are incorporated at the implementation stage. 

We have carried out bespoke selection processes for asset owners who have very specific needs. We have worked with Asset Managers to create bespoke products that consider the specific principles of the asset owner.

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.

          Redington’s 10x10x10 Manager Research Process includes ESG as one of the 10 Selection Factors we assess when appointing a Preferred Manager. All ongoing Preferred List research covers integration of ESG factors as a key component of investment due diligence:

- We ask questions about ESG integration in Requests for Information (RFI). 
- We look for evidence of ESG integration in websites and publications. 
- We ask detailed questions during due diligence meetings and reporting in order to test our thesis and the written material we have received about ESG integration.
- In many circumstances we also carry out stock level portfolio analysis on ESG risks within the portfolio. 

This information is used to make an assessment of each strategy vs others in the peer group.

In order to ensure the consistency of our output we developed the following framework that works as an assessment guide:
1. Integration into investment process
2. Infrastructure
3. Engagement (stewardship)
4. Business focus & accountability

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

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.

          Concerns are raised during the quarterly monitoring or alternatively when ratings are reviewed (12-18 month cycle). Our preference is to understand the position of the asset manager and work with them to seek an action plan for improvement where necessary.

16.3. Additional information. [OPTIONAL]

The way in which ESG materiality is evaluated by the manager in the monitored period are captured during our annual survey of Preferred and Approved managers. 

ESG portfolio characteristics are assessed for  listed equity and listed corporate credit managers as part of our regular quarterly monitoring. We plan to extend this analysis across other asset classes in future. 

Targets are currently set on an individual mandate by mandate basis. For example, in 2019 we worked with one of our pension clients to impose a carbon intensity limit for their Buy and Maintain Credit portfolio. The carbon intensity limit included in the Buy & Maintain credit portfolio has led to a 42% reduction in carbon intensity with no change to the yield or duration of the mandate. 

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 report back to Asset Owners on our asset manager selection via a one page report (which includes our relative assessment of the asset manager's integration of ESG factors into the investment process). 

Asset Owners make the appointment decision (we do not carry out any fiduciary management activities). 

Asset Owners who are Manager Reporting clients receive PRI Strategy and Governance scores where they have been disclosed to us. MSCI ESG reporting is also provided for listed equity mandates and some corporate credit mandates. These reports are issued on a quarterly basis and the PRI scores updated annually. If there were any ESG concerns for an individual mandate these concerns would be raised in the quarterly manager report.

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.

          Whilst we monitor the performance, risk and correlations of our Preferred Managers each quarter, we avoid judging the success of our manager research process in isolation from our client’s success. As a result we monitor performance of managers in our Preferred Lists, but are mindful of viewing our success holistically in our ability as a team to help our clients reach their funding goals.

18.2. Additional information. [OPTIONAL]

IC 19. ESG in manager selection, appointment and monitoring (Private)