Ireland’s wealth fund to integrate ESG across all domestic deals

€19.7bn ISIF is working with consulting firm ERM

Ireland’s €19.7bn sovereign wealth fund is set to integrate ESG across all its Irish transactions with the development of a bespoke ESG framework for its growing investments in the country’s private market.

The Ireland Strategic Investment Fund (ISIF) – whose core mandate is to support economic activity and employment in Ireland – comprises both an €8.7bn “discretionary portfolio”, focusing on equity investments in Ireland and elsewhere, and an €11.2bn “directed portfolio” which is dedicated to investing in Irish banks.

RI was told that the fund commissioned the framework– which it expects to be in place by the end of 2018 – after identifying “a need for specialist services in private markets to assist in further developing our considerations of ESG in our Irish portfolio”.

The new framework will apply to ISIF’s discretionary portfolio and is being developed with environmental consulting firm ERM, which was appointed in September as part of a raft of responsible investment contracts which also included the hiring of UK-based engagement house Hermes Equity Ownership Services to provide proxy voting and shareholder engagement services. Oekom Research and ISS-Ethix Climate Solutions were additionally taken on to “provide a suite of portfolio analytics and reporting across the Fund’s Global Portfolio”. The contracts were for five years each.ISIF’s Irish portfolio is expected to grow significantly over the next five years as its global holdings are sold down and the proceeds re-directed towards domestic investments, as part of the fund’s Global Portfolio Transition Strategy (GPTS). To date, it has €3.4bn committed to investments in Ireland.

A spokesperson for the fund told RI: “The ESG framework is a specific project focused on the bottom-up systematic integration of ESG factors across all Irish transactions on both pre-investment and post-investment basis. ISIF is also aiming to establish systematic ESG monitoring for the Irish portfolio as part of the framework.”

According to new figures, ISIF’s discretionary fund grew from €8.1bn to €8.7bn between 2016-17.

Ireland’s central bank last month awarded its first ever outsourced mandate, hiring Amundi as part of a tender process which required investment managers to commit to responsible investment.

The country’s parliament, the Dáil Éireann, is also set to debate early this year a divestment bill which was approved in January 2017. In a statement dated June 2017 on the issue, Kieran Bristow, ISIF’s Head of Investment Strategy, warned a legislative committee of the “unintended consequences” of the bill.