Three charities have publicised a request for proposals from asset managers to run a £32m (€37m) investment mandate with maximum positive social and environmental impact.
In a press release, the charities – Blagrave Trust, Friends Provident Foundation, and Joffe Charitable Trust – said their key instruction to managers was to “’impress us’ on environmental and social impact” and that they would be asking short-listed candidates to present their proposal to an auditorium of mission-led investors. The press release referred to an ‘ESG investing Olympics’.
Colin Baines, investment engagement manager at Friends Provident Foundation, said: “We wish to send a market signal that asset owners are demanding higher standards of impact and ESG investment. Asset managers will recognise that the standards expected by mission-led investors like us today often become the market norms of tomorrow.”
Growing demand from asset owners to have a purpose beyond financial return with their investments was being reflected in a growth in funds labelled as impact, sustainable, responsible, green or ESG, he added, but “the quality of these funds varies greatly with marketing claims not always aligned with investment practice”.
The charities said the request for proposals was being advertised publicly as part of their decision to take a more transparent approach to asset manager selection in a bid to “bring investment management ‘out of the shadows’”.
The charities said they planned to feature short-listed managers as best-in-sector in a report to signal to the market what emerging best practice and asset owner expectations look like.
They indicated being agnostic as to the asset class, impact theme, and type of manager, with proposals being sought from “boutique impact funds intentionally seeking out start-ups with solutions to large ESG funds moving markets and transnational companies via their stewardship”.
Alex Jacobs, director of the Joffe Charitable Trust, said: “We will be looking for intentional social and environmental impact, high standards of ESG integration covering exclusion, engagement and its escalation, voting record, and in-house expertise, plus impact reporting.
“We know there will be trade-offs between different approaches, and we look forward to seeing which perform well.”
Guiding principles included that the investment strategy be scalable to test the hypothesis that other impact-oriented pools of capital could come on board. Some short-term liquidity would be required, with an option for substantial – specified as more than 50% – liquidity within 12 years.
Asset managers have to submit applications by 7 February, which should include an explanation about how important impact or ESG investment is to their business and they hoped to shape the broader investment market.