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UK funds set RI reporting expectations for managers

A group of 16 UK asset owners with combined assets of more than £200 billion ($269 billion) have developed a guide to responsible investment reporting in public equity. The aim of the guide is to clarify the investors’ reporting responsible investment requirements as they seek to include it in RFPs, manager searches, due diligence and investment mandate terms.

The guide will be used by the asset owners supporting it, to inform their engagement with, and monitoring of, current and perspective managers.

“It is hoped the guide will be particularly useful for smaller pension funds, and once a mandate has been awarded to a fund manager, where reporting will help us to monitor how well the fund managers’ approach to RI is aligned to the broader investment strategy,” the report says.

The purpose of the guide is to encourage improvements in the quality of RI reporting for individual mandates.

While in the past many managers are reluctant to take on more reporting, the asset owners believe long-term benefits that stem from greater transparency and accountability will outweigh any short-term incremental reporting costs.

The report breaks reporting into two parts – ESG integration and stewardship – and outlines the expectations and guidelines for managers in their reporting of these two activities.

Within ESG, the guidelines cover both identifying and managing risks and opportunities, and includes benchmarking relative portfolio level ESG analysis, stock or sector decisions, identification of long-term trends and changes to the ESG integration process.

Within stewardship the guide covers both process and outcomes with regard to engagement and voting, looking at progress against engagement objectives and the attribution of engagement to portfolio risk or return.

The asset owners which support the guide believe that better reporting can help to build a better understanding of the extent to which responsible investment factors and activities can help to explain both short and long-term investment risk and performance in public equity.

The guide is designed to initiate discussion and dialogue between asset owners and their managers on the reporting metrics and whether they are applicable to other asset classes.

“Fund managers should regard these reporting expectations as a guide to help kick-start a process of reflection regarding their approach to responsible investment,” the guide says.

The asset owners supporting the guide are BTPS, PPF, Kingfisher, West Midlands, Strathclyde, SAUL, Environmental Agency, Merseyside, Northern Ireland Local Government Officers’ Superannuation Committee, Pensions Trust, Lothian, USS, Unilever, BBC, NEST and RPMI Railpen.


To access the guide click here