An open and collaborative interaction between the board and internal environmental, social and governance staff is essential for asset owners to implement responsible investment policies, a panel of trustees told the PRI in Person delegates in Berlin.
Renosi Mokate, chair of the giant South African fund GEPF, said the board must demonstrate it has an interest in ESG and be open to learning.
“For ESG specialists, they have to have a level of competence that inspires confidence in the board,” Mokate said. “This is an evolving area and needs interaction between staff and the board; nothing can be out of bounds.”
Staff of GEPF recently looked at the fund’s responsible investment policy and framework, and reworked its materials to introduce greater clarity.
“This has given us clarity, for example with engagements, we have never had an explicit approach, but we now do. This allowed the board to reflect on that and agree on the way forward.”
GEPF also included the sustainable development goals in its framework.
ABP trustee Xander den Uyl said the establishment of the taxonomies around what makes a sustainable development investment, by APG and PGGM, was a great example of the board and the staff working well together.
“We have been working very hard on getting the SDGs investable,” den Uyl said. We have a very clear responsible investment policy, and very good co-operation between the responsible investment staff at APG and the board of ABP.”
Mokate said GEPF also spends much time on board education, and the trustees make decisions about what areas they want to do a deep dive into.
“This allows the committees to work more efficiently and ensures the information is well developed and efficient,” she said.
Cbus Super trustee Rita Mallia said the Australian fund has a good internal team that prioritises getting the board timely and relevant information.
“We have 100 pages to get through in our board papers, so making it efficient is really important,” Mallia said. “We are all time poor so being able to get timely information is important. Embedding ESG is an important consideration, so it doesn’t just become another layer and another thing we need to do.”
Service Employees International Union Master Trust director Vonda Brunsting said her board recently had a difficult conversation around race and how it played out at the fund and in its investments.
“We recently responded to a black man being shot and killed by police, and we brought this conversation into the pension board room,” Brunsting said. “Race is a really hard topic, but we thought we needed to address the issue.
“We were in a consultant search at the time, and brought the issue of race into that search. We then worked with our consultants to examine the portfolio and policies in relation to this.”
The US-based fund made a number of changes, including to the makeup of its own board, and when vacancies came up, it added four new directors; all were people of colour and two were women.
The fund also took up the issue of diversity in corporate governance.