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.

Asset owners increasingly include ESG considerations in their investment management agreements (IMAs) and other legal documentation. More than two-thirds (69%) of PRI asset owner signatories typically implement ESG requirements in contracts such as IMAs and limited partner agreements (LPAs).1 To ensure that investment managers abide by their clients’ ESG requirements, certain legal aspects are becoming standard features of the asset owner-investment manager relationship.

With fiscal policy now the dominant lever supporting growth in most economies, it has become even more important to understand how the various fiscal policies will flow through to GDP, inflation, and different markets. We have been working to get our understanding of fiscal policy to the same level as our understanding of monetary policy. This is a difficult task, as fiscal comes in so many forms, each having different implications at the macro and micro levels. Some policies can be clearly counter-cyclical (the best of these are typically direct checks and shovel-ready infrastructure), while others aim to address more structural problems (like low productivity or environmental issues) but are less effective cyclically, as they are typically longer-term.