Environment Agency Pension Fund tenders long-term ‘flagship’ global sustainable equities mandate

Mandate of up to £250m will incorporate aspects of Kay Review

The £2.4bn (€3bn) Environment Agency Pension Fund has launched a formal search for investment managers to manage a portfolio of sustainable, global, listed equities – with a specific focus being placed on the long-term nature of the contract with the appointed manager/s.
The total amount of assets to be managed for what the fund sees as its ‘flagship’ mandate is between £75m and £250m, and one to three managers will be appointed.
Candidates are expected to have a long-term strategic approach to sustainability, and to integrate environmental, social and governance (ESG) considerations broadly. Managers are likely to have a strong commitment to non-financial research which should go beyond short-term considerations of ESG risk factors and ‘standard’ corporate governance.

The request for proposal (RFP), released today (September 3) on the EU’s tender database, states: “The Law Commission have recommended that the Government change the investment regulations to accommodate more long term relationships with fund managers, but this is unlikely to happen before appointment.

“However, the formal contract will seek to establish a framework supportive of a long term relationship, with anemphasis on communication and openness, including more extensive non financial reporting by the manager and greater clarity over expectations from the EAPF.”

Incumbent firm J. Safra Sarasin, in place since 2004, will be able to re-tender, the fund’s Chief Investment Officer Mark Mansley told RI. The mandate is a core part of the fund’s 24% allocation to sustainability orientated investments.
The fund says it is not seeking to appoint managers offering only narrow sector or single thematic funds (such as water, renewable energy or clean technology). And funds which rely solely on negative screening “are not of interest”.

Mansley said the fund sought to be innovative in setting the Investment Management Agreement, aiming to further best practice and address some of the issues raised by the Kay Review. The fund says the mandate is based on market research and feedback from its Mandate of the Future exercise – as discussed in a series of articles on Responsible Investor.
The deadline for the first round of submissions is September 24 – where the fund will seek ‘statements of capability’ from potential suppliers. Up to 15 candidates will be taken forward to the full tender, and the final appointment should be announced early next year. The fund is being advised by consulting firm Mercer.

DON’T MISS: Mark Mansley, CIO at the Environment Agency Pension Fund, will be speaking about the mandate at RI’s ESG in Manager Selection and Monitoring seminar in London on 8 October:
Click the link for details