Responsible Investor

Measuring asset managers for responsible investment

How can investors gauge whether their fund managers practice what they preach on RI?

Over the last year, there has been increasing attention paid to the implementation of responsible investment (RI) practices for both pension funds and fund managers. A number of reports, such as the first annual UN Principles for Responsible Investment review, have been published recently tracking the development of responsible investment practices and the integration of such practices into mainstream asset management investment processes. At the same time, some multinational companies and an increasing number of global asset owners, have become frustrated at the lack of transparency of external fund managers regarding their RI practices and the systems and processes underlying their actions with the companies they invest in. For companies this phenomenon is often referred to as “questionnaire fatigue”. They are approached by fund managers (and others), working it is assumed on behalf of the company shareholders, to increase their disclosure of, and to strengthen, their environmental, social and corporate governance (“ESG”) practices. An issue arising for many companies is that when this information is

gathered and assessed (or rated) there is generally no discernable change in investment behaviour from their key shareholders. In some cases the asset managers are unknown to the companies and do not appear as significant shareholders on their registers.This background of interest and focus on ESG performance from investors has resulted in an ongoing debate between stakeholders on what the most appropriate standards of RI practice should be and how practically the application of such standards could be meaningfully assessed.
In judging the RI practices of fund managers, a starting point may reasonably be:
• A comparison with the company’s past practice and performance.
• A comparison with appropriate peer groups.
• The adherence to and explicit support of principles (e.g. PRI) and industry codes of conduct, and;
• The development of practices and conduct which meet the evolving expectations of global investors.
A significant amount of work has already been done by a

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