Sustainability Digital – March 2021

Asset Owner Technical Guide: Monitoring

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).

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