Mercer to include ESG ratings in asset manager search process

New initiative from investment consultant

Investment consultant Mercer has announced that its environmental, social and governance (ESG) ratings will be included in client reports on asset manager searches and performance.
The firm hopes that making ESG a key aspect of the search process will promote “constructive dialogue” with fund managers – noting that less than 10% of the 5,000 strategies it rates achieve high ESG scores.
It comes as more institutional investors are expressing an interest in ESG while relatively few asset managers integrate it into their investment processes as yet.
“This inclusion reflects Mercer’s view as to the importance of ESG factors for long-term investors and increased client interest in ESG issues,” the firm said. Mercer currently assigns ESG ratings across investment styles, asset classes and geographies as part of its manager research.
“ESG factors have the potential to become more important risk-return drivers for our clients,” said Andrew Kirton, Mercer’s Global Chief Investment Officer.
“Incorporating ESG as a key aspect of the search process will promote constructive dialogue with managers on ESG related issues and result in better overall outcomes.”
“The list of UN Principles for Responsible Investment signatories continues to climb, yet only 9% of the more than 5,000 investment strategies we have rated achieve our highest ESG scores,” added Jane Ambachtsheer,Mercer’s Global Head of Responsible Investment.
She said the inclusion of ESG ratings would not only enhance Mercer’s due diligence but also its clients’ ability to include ESG and active ownership considerations in the selection and monitoring of managers.
Mercer will implement the new ESG reporting process globally by the end of 2012.

“The importance of ESG factors for long-term investors”

Last month Mercer said that more asset owners are considering climate change integration in selecting asset managers, though mandates are rarely awarded solely on it as yet. Its Global Investor Survey on Climate Change report was commissioned by the North American Investor Network on Climate Risk (INCR), the European Institutional Investors Group on Climate Change (IIGCC) and the Australia/New Zealand Investor Group on Climate Change (IGCC).
And also last month it emerged that Will Oulton, the former Head of Responsible Investment for Europe, Middle East and Africa (EMEA) at the firm, has joined Australia-based Colonial First State Investments as Global Head of Responsible Investment. He takes over from Amanda McCluskey.