ESG a factor as United Nations pension fund seeks portfolio risk system

ESG analytics a requirement for service provider at $56bn fund

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Environmental, social and governance (ESG) factors are an issue as the $56bn (€49bn) United Nations pension fund is seeking a provider for a portfolio risk system.

The UN’s New York-based procurement division has issued a ‘request for an expression of interest’, or EOI, for a Portfolio Risk Analysis and Performance Attribution system for the Investment Management Division of the UN Joint Staff Pension Fund (UNJSPF).

The system will be used to “dynamically adjust and update reports, allocation limits, stress testing, sensitivity analyses, factor analyses, tracking risk limits, and risk budget so they are in line with overall fund’s risk tolerance and target return”.

It continues: “Portfolio construction, and portfolio aggregation will have greater impact on returns (relative, and especially absolute) as the fund’s size grows in market value, due to market concentration, suitable investment universe, restricted securities, mid-caps exposure, small caps, ESG, real assets, alternative investments, all presenting ongoing challenges to portfolio diversification, risk and performance measurements.” The request for an expression of interest closes on July 21.The internally managed fund’s assets are invested in 25 currencies and 34 countries and the UN says the system would “effectively evaluate and monitor the risk and performance of the fund’s global portfolio(s) and assist with the reporting of such information”.

Interested service providers are expected to be able to provide not just professional credentials, a minimum of two pension fund clients with asset of at least $75bn and a seven-year track record — but also what is described as “ESG Analytics”.

The fund has an ESG programme in place, and says that ESG issues “play an important role” when it evaluates investments. It has restrictions on investments in tobacco and armaments securities, and the green investment portion of its ESG programme includes both green bonds and green equity. In 2014 it backed two low carbon exchange traded funds from BlackRock and State Street.

Separately, the UN Federal Credit Union (UNFCU), the $4bn body that offeres banking products for the UN community, has announced it has become carbon neutral.