Rhode Island seeks to push private managers on ESG with new request for proposal

The US’s smallest state seeks ESG consultant to inform private investments.

The Office of the Rhode Island State Treasurer, which oversees the US State’s $8bn pension pot, is looking to develop “potential strategies” to push managers of its private assets to “more effectively manage ESG risks”.

In a request for proposals (RFP), which closed yesterday (September 18), Rhode Island announced that it was seeking a consultant to help its investment team develop “a strategy for adoption of ESG integration in the investment policies and procedures relating to private assets”, covering “equity, credit, real estate and infrastructure”.

It called for proposals from individuals or organisations with a “deep knowledge of ESG integration techniques”.

As well as recommendations on incorporating ESG factors in “due diligence, selection and monitoring of private investments”, the RFP stated that it is also seeking “potential strategies for encouraging private asset managers to more effectively manage ESG risks in their own due diligence and operations of their underlying investments”.

“As long-term investors, we believe that environmental, social and governance issues have a material impact on value creation for shareholders, including our members”, the document said.

The assignment, which is provisionally set to end in November, may be extended to allow the successful bidder to help Rhode Island’s investment team implement “one or more of the [consultant’s] recommendations”.Rhode Island wants any recommendations to draw on “best practices among other reputable institutional investors”.

The chosen consultant will be responsible for, in part, identifying “potential process improvements in the selection, monitoring and engagement processes with respect to integration of ESG considerations in the private asset investment process”.

Rhode Island State Treasurer, Seth Magaziner, who has been a leading light in the US on corporate governance since he was elected in 2014, told RI last year that the state was looking to become “more thoughtful about integrating ESG into our due diligence process, our manager due diligence process since most of what we do is outsourced”.

The State has also ramped up its engagement under Magaziner, filing shareholder resolutions at under-fire US student debt collection firm Navient and Archer Daniels Midland – the latter was withdrawn before the US agricultural processing giant’s annual meeting after it made concessions on its greenhouse gas emissions targets.

In May, Randy Rice, Deputy Director of Communications & Shareholder Engagement for the Office of Rhode Island, spoke of the State’s frustration in its engagement with Navient, which was prompted by the growing subprime student loan crisis in the US.

As a result, Rice told RI on a webinar, Rhode Island is now pursuing a legislative tack to protect the state’s students from “predatory and deceptive practices” by proposing in 2019 a “Student Bill of Rights”.