Asset managers get behind new pension fund-led ESG reporting initiative

A range of asset managers have expressed support for the new environmental, social and governance (ESG) reporting document released today by a group of UK pension funds.

The eight–page ‘A Guide to Responsible Investment Reporting in Public Equity’ was drafted following a number of roundtable meetings with pension funds and open consultation with fund managers.

It is being stressed that it is an “iterative document” which will be updated to reflect further feedback from fund managers and changing best practice.
“It should be seen in the context of our wider efforts to include responsible investment in requests for proposals, manager searches, due diligence and investment mandate terms,” the funds say.

The guide, first reported by RI in October, has been formally unveiled by a group of asset owners spearheaded by the BT Pension Scheme (BTPS), the West Midlands Pension Fund and the Environment Agency Pension Fund (see an in-depth discussion with them here).

Major asset owners that have responded to the announcement include the likes of J.P. Morgan Asset Management, Royal London Asset Management, BTPS-owned Hermes and F&C.

Supportive asset owners currently include the Pensions Protection Fund (PPF), the Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC), the Superannuation Arrangements of the University of London (SAUL), the Pensions Trust, the National Employee Savings Trust (NEST), RPMI Railpen, the Universities Superannuation Scheme (USS), and the pension funds of Kingfisher, Strathclyde, Merseyside, Unilever, Lothian and the BBC.

The report – housed by the National Association of Pension Funds here – takes its cue from the ‘Aligning Expectations: Guidance for Asset Owners on Incorporating ESG Factors into Manager Selection,Appointment and Monitoring’ document published by the Principles for Responsible Investment in February 2013.

“There is a growing recognition in the market that Responsible Investment is not a ‘thing’ on its own, but is in fact central to everything we do as long-term investors on behalf of our clients. I welcome the Guide as a tool to help facilitate a constructive and meaningful ongoing RI dialogue between asset managers and their clients, and to help asset owners hold us to account,” said Robert Hardy, Executive Director and Head of Corporate Governance at JP Morgan.

“As a company with a long-standing commitment to active ownership, we have been delighted to see a growing interest from our clients in our engagement and voting activities. But this development brings real challenges in responding to an increasingly diverse set of questions and reporting requirements. We therefore very much welcome this initiative by pension funds to clarify their expectations of asset managers,” said Vicki Bakhshi, Director, Head of Governance and Sustainable Investment, F&C. She hoped it would help to “set the scene for greater transparency and accountability throughout the investment chain on ESG issues in future”.

And Niall O’Shea, Head of Responsible Investment at Royal London Asset Management, added: “This guide is at pains to avoid reporting for reporting’s sake; instead asking asset managers to focus on how ESG is relevant to investment and encouraging us to demonstrate progress over time.” He went on: “These are reasonable requests and we welcome the clarity the guide provides.”

Hermes Investment Management’s CEO Saker Nusseibeh, welcoming the report, said the firm has been publicly advocating “a fundamental shift in the way investment is viewed by owners and investors”. He referred to Hermes’ recent Integrating ESG risks into our investments document.