The Pension Fund Coalition for Inclusive Capitalism has released model contract language establishing minimum environmental, social and governance guidelines in investment agreements with asset managers.
It said the resource was intended to “protect against superficial implementation of impact-oriented standards and afford asset owners the ability to better direct and monitor their asset managers to ensure they invest in line with their priorities”.
The Coalition, a group co-chaired by Hiro Mizuno, ex-chief investment officer of Japan’s Government Pension Investment Fund, and Theresa Whitmarsh, ex-executive director of the Washington State Investment Board, collaborated on the resource with public pension fund managers and legal advisers.
Representatives from various pension funds and organisations provided input, according to the Coalition, such as British Columbia Investment Management Corporation, PGGM, CFA Institute, and the International Corporate Governance Network.
The model contract language is for use in public equity and private equity markets. According to the Coalition, it offers portfolio and legal teams new tools for model mandates, voting rights, reporting requirements, and sample ESG factors and criteria.
The resource also includes guidance for fund managers and legal teams on other key considerations in determining ESG objectives within their broader investment agreements.
“With these tools, pension funds will have more ways to ensure that their capital is being deployed by asset managers in strategies that fit with a preferred approach to sustainability and ESG integration,” said Whitmarsh.
Mizuno said: “Most public pension funds, have little control over how – or whether – their assets are invested with ESG impact guidelines. The model language addresses this gap by ensuring long-term value creation standards are upheld.”
The Pension Fund for Inclusive Capitalism is an initiative of the Coalition for Inclusive Capitalism and the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School.
The model contract language resource can be downloaded here.