ESG a key part of new €200m Environment Agency equity mandate

The £1.7bn (€2.1bn) Environment Agency Pension Fund is seeking fund managers for up to £165m (€200m) in low volatility equities – with environmental, social and governance (ESG) factors accounting for 15% of the selection criteria.

The fund is seeking up to three managers to run between £50m and £165m.

“While identifying equity managers with a strong and credible process is our priority, we would be interested in hearing from managers who understand and are willing to consider integrating financially material ESG considerations into investment, and, in particular, given the nature of this mandate, consider the financial impacts arising from ESG risks,” the funds says.

It prefers an integrated process of equity selection using financial and ESG criteria rather than negative screening.

Managers are expected to be responsible for voting and engagement with portfolio companies – or be prepared to work with a governance overlay provider.

The Bristol-based fund would also like to hear from managers who can demonstrate the use governance as a tool to reduce risk in the portfolio.
It adds: “We would prefer the manager to show commitment to responsible investment as evidenced bye.g. UN PRI membership, support for other responsible investment initiatives and/or allocation of resources to responsible investment.”

All the fund’s managers and advisors are already signatories to the UN PRI, according to its most recent annual report.

The portfolio may be managed actively, quantitatively or passively and the mandates will run for an initial three-year period with possible extensions for further years.

Respondents have to provide a 250-word explanation of how environmentally responsible investment and corporate governance has been incorporated into the equity selection and portfolio construction process. They will have to provide the names of external research, engagement, voting, and other service providers.

They will also have to summarise their commitment to responsible investment and demonstrate their compliance with the UK’s Stewardship Code. The deadline for responses is July 27.

The agency is a government body which aims to improve the environment and promote sustainable development.