A growing number of asset owners now expect their investment managers to incorporate ESG factors into their investment processes. This means that ESG needs to be at the core of the relationship between the asset owner and the investment manager – and that ESG considerations need to be addressed at every stage of that relationship, from setting the initial investment strategy, to drafting requests for proposals, to selection, appointment and monitoring.
Thorough and consistent monitoring is critical to ensure the delivery of the terms and conditions on which the manager was appointed and that it is meeting the asset owner’s requirements. Regular monitoring of and reporting by the investment manager will provide the asset owner with insight and necessary detail to understand the manager’s approach to responsible investment, its alignment to the mandate and the investment management agreement (IMA), and to its stated investment principles.
Leading practice is developing quickly. The 2019 PRI Leaders’ Group provides examples from asset owners in our signatory base who have demonstrated leading practice in monitoring (see Box 1: The PRI Leaders’ Group).
The COVID-19 global health and economic crisis has highlighted the need for leadership and capital to be urgently targeted towards the vulnerabilities in the global economy. The issues of sustainability have never been more important and it’s a critical time for investors to be collaborating for better corporate behaviours and economic outcomes.
According to the IMF, more than $20 trillion is needed over the next 20 years to be invested in climate change and other sustainable development goals. But countries can not achieve this on their own. Governments need to make it easier for business to finance and invest in sustainable development projects, the private sector needs to mobilise for long-term investment, and new solutions for financing the SDGs must be created.
This conference was an urgent call to action for all investors to influence investee companies to change their focus and put people before profits to create a more sustainable economy, and to wake up to the crucial role they play in ensuring a sustainable recovery.
Through case studies of investors and corporate collaboration, investors heard how their peers have been engaging for change on issues relating to the environment, labour practices and better long-term outcomes. The conference addressed the social and economic consequences of the coronavirus and outlined the role that investors can play in the path to a sustainable economy.