GLOBAL - Almost 80% of pension fund signatories to the UN Principles for Responsible Investment (PRI) are considering responsible investment issues in their investment manager selection process, or plan to do so this year.
This was one of the key findings of a progress report by Mercer Investment Consulting on the 200 institutional investors, which collectively have more than $9trn (€6.6trn) in assets under management, who have ratified the global charter.
Dutch ABP and PGGM, Denmark's PKA, UK-based Universities Superannuation Scheme (USS), French Fonds de réserve pour les retraites (FRR) and Swedish buffer funds AP1-3 are among the European pension fund giants who have committed to integrating environmental, social and governance (ESG) issues into their investment policies and engagement strategies.
Some 66% of the funds who signed the PRI consider responsible investment within their RFPs, while a further 13% plan to do so this year.
James Gifford, executive director of PRI, told IPE: "You know that asset owners are taking responsible investment seriously when PRI-type activities find their way into investment mandates."
However, Rory Sullivan, head of investor responsibility at Insight Investment, which has also signed the PRI, said while the inclusion of responsible investment requirements in RFPs was an important step forward in moving responsible investment into the mainstream investment universe, it was only a start.
"One or two generic questions in RFPs will not make a difference until asset owners properly scrutinise and evaluate the claims made by asset managers," he said.
"They also need to assign a formal weighting - at least 5% and ideally 10-12% - to responsible investment in manager selection processes, and scrutinise fund manager implementation of responsible investment in a similar manner to other aspects of fund management services."
The survey also revealed 82% of pension funds are conducting at least some shareholder engagement on ESG issues.
A formal policy on responsible investment has been adopted by 67% of pension funds, with a further 15% planning to develop a policy in 2007.
Of the six principles, investment manager and pension fund signatories have performed best in implementing principles 1 (integration of ESG issues into investment processes) and 2 (active ownership).
Gifford said: "Principle 2 appears to be more advanced in terms of PRI implementation - possibly because of the groundwork laid by the corporate governance movement over the last decade.
"Most large institutions now recognise that they need to fulfil their ownership responsibilities. Integration of ESG issues, while increasing, is still very much in the early stages in the mainstream sector," he added.