UK - Fund manager signatories to UN-backed Principles of Responsible Investment (PRI) are front runners in environmental, social and governance (ESG) issues, though a performance gap between best and worst performer marks overall practice, according to FairPensions.
In its latest Investor Responsibility league table of fund managers' risk management and accountability performance, the London-based charity promoting responsible investment has found there is a strong correlation between signatories to the PRI and performance on ESG analysis and engagement.
That said, assessing the UK's 30 largest fund managers, by looking at the resources, activity and evidence of success, the research found there was a wide "performance gap" between the best performers (F&C, Insight, Hermes and Aviva) and the worst (Credit Suisse, Invesco and Artemis).
While there were marked improvements in the management of the risks presented by ESG issues, with engagement scores rising 22% and transparency scores 25%, thanks to increased demand from pension funds in particular, Exley explained within their ESG practice many managers still focus on just the governance part, leaving environmental and social issues behind.
The findings are good news for the PRI organisation established in early 2006 as the organisation has been criticised for demanding too little of its signatories - which now amount to around 400 companies - while investors who have not signed up to the standards have complained incorporating all principles could be problematic.
The principles recommend actions to investors for incorporating environmental, social and governance issues into mainstream investment decision-making and ownership practices.
Despite there being a "very clear correlative performance, the UN PRI is in itself not a guarantee for performance," said Duncan Exley, spokesman and director of campaigns at Fairpensions.
Elsewhere, consultancy firm Mercer has revealed it will develop a ‘carbon footprint' analysis of clients' portfolios, comparing it to a chosen benchmark, such as the FTSE All-Share, S&P 500 or Russell 1000, while environmental research organisation Trucost will provide data to Mercer's analysis tool.
Mercer claims to be the first consultant to offer such a service but has developed it after institutional investors expressed an interest in assessing and better managing the risks and opportunities associated with the impact of the environment and climate change.
Earlier this year, Mercer announced it would rate all investment managers in its databases on how they ESG factors into mainstream investment processes. (See earlier IPE story: Mercer to rate managers on responsible strategy)
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