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UK Environment Agency awards £80m emerging markets mandate

France’s Comgest replaces Scottish Widows for ESG-based portfolio.

French independent asset manager, Comgest, has won the mandate to run £80m (€96m) in actively managed emerging markets equities for the £1.6bn Active Pension Fund of the UK’s Environment Agency.
The Environment Agency, which has a clear ESG (environmental, social and governance) strategy in the way it runs its pension assets, tendered for the mandate last year after terminating a contract with Scottish Widows Investment Partnership (SWIP) for poor financial performance and the loss of portfolio managers to rivals. The pension fund received about 30 tenders from fund managers for the re-tendered brief. Comgest, which has offices in Paris, Dublin, Hong Kong and Tokyo is a long-term growth manager in equities and runs €13.0bn in assets, notably in emerging markets. Howard Pearce, head of environmental finance and pension fund management for the Environment Agency said: “We were impressed by their fund managers, investment style, and stock selection that integrates corporate governance, social and environmental risks as a UNPRI signatory. This appointment further supports our opinion that those fund managers who seek to take into account financially material environmental risks and opportunities, such as climate change, in their investment decisions, will produce better financial returns for the beneficiaries of our pension fund, and this is entirely consistent with our fiduciary duty.”As well as financial performance, Comgest will also be reviewed during the three-year mandate on delivery of the fund’s environmental overlay strategy whereby it integrates environmental considerations into risk management, stock selection, company engagement, and proxy voting. The manager has to refer any environmental resolutions to the fund and carry out an annual environmental carbon footprinting of its investments using methodology from Trucost, the environmental research house.
SWIP lost a number of staff last year who were involved with running some of its sustainability themed portfolios. Andrew Ness, former investment director on the global emerging markets (GEM) desk, who was portfolio manager for SWIP’s GEM sustainability portfolios, was part of an emerging markets team lift by Scottish funds rival, Martin Currie. In October last year, SWIP hired Craig Mackenzie, a well-known figure in the UK responsible investment scene, as its new head of sustainability.
The Environment Agency has several consultants advising on RI and manager selection. Mercer provides strategic investment and fund manager advice. Rathbone Greenbank gives specialist advice on sustainable responsible investment, and bfinance assists with the evaluation and selection of fund managers. Morgan Stanley carried out the transition management for the latest mandate switch.