Mercer to launch ESG-screened version of global asset manager database

Investment consultant Mercer says it plans to launch a new version of its asset manager database so that clients can screen strategies by environmental social and governance (ESG) ratings.

“Later this year, Mercer will launch a new version of its Global Investment Manager Database in which clients can view the pool of 5,000+ ratings and related research, and search through and screen strategies by ESG ratings,” the firm said.

The GIMD is a comprehensive database used by large institutional investors to access up-to-date information on investment managers and strategies.
It will come as nearly 500 investment strategies have been awarded the top environmental, social and governance (ESG) ratings from Mercer.
In a new analysis, it said that 9% of the 5,175 strategies that have been assigned ESG ratings have reached its top ‘ESG1’ and ‘ESG2’ levels – which works out at 465 in total.

This compares to 285 of the 3,530 strategies with the top rankings in 2010, with the proportion of high achieving strategies broadly similar. In 2008, when Mercer started the ESG ratings, there were 66 strategies in the top two tiers.

The new figures come in “Mercer’s ESG ratings update – 5,000 and counting” by Mercer’s Jane Ambachtsheer and Katherine Burstein. Ambachtsheer, the firm’s Global Head of Responsible Investment, will discuss the findings on a UN Principles for Responsible Investment webinar entitled Unravelling the relationship between ESG factors and investment performance tomorrow (February 14). Details were not surprised to see a relatively low percentage of strategies achieve top ratings, as our approach involves setting a high bar,” said Andrew Kirton, Mercer’s global chief investment officer.
“There is still much work to be done by the investment community to fully integrate responsible investment practices.

“We would expect the number of highly rated strategies to increase over the next few years as more and more investment professionals come to recognise the sound investment and competitive reasons for active ownership.”

As in previous years, private equity has the highest proportion of highly rated ESG strategies, while hedge funds and fixed income had the fewest. Emerging Markets and Asia-Pacific have the highest proportion of top ratings, while Canada has the least.

Fifty-eight percent of the ‘ESG1’ rated strategies are “ESG” or “Sustainability” branded or thematic strategies, and 72% are managed by PRI signatories. PRI signatories manage 68% of the ‘ESG2’ level strategies.

The best ESG strategies, Mercer says, share common features. These include: a demonstration that ESG features in investment decision-making and corporate culture and that an effort is made to build in some ESG factors into valuation metrics.

They also include long-term investment horizons and low portfolio turnover, integrated ownership policies, and a willingness to collaborate with other institutional investors.