In today’s environment many pension funds and their providers have an ambition to meet a set of sustainability criteria in the design of their investment portfolios.

Many providers claim they can offer this as an add-on service, but large differences exist and only a limited number of providers have ESG investing really in their genes.

Client request:
This Euro 5bn multi-employer scheme wanted to hire an engagement overlay manager, renegotiate contracts with external managers to be environmental, social and governance (ESG) compliant and implement ESG reporting in line with Trustee requirements.

Our approach:
• The project started by agreeing preferences and beliefs of the Trustees about sustainable investing.
• An independent ESG expert was added to the Investment Committee to address the skills weaknesses identified.
• All investment processes were screened and amended to ensure the ESG criteria were well embedded.
• An engagement overlay manager was selected and the custodian’s service package upgraded with ESG reporting.
• Some managers were replaced, and during the process overall risks and returns were continually monitored against strategic requirements.

Deliverables for the client:
• A framework for the Trustees to communicate with key stakeholders.
• ESG criteria implemented in the underlying investment portfolio.
• Access to new ways of thinking to execute ESG investments, such as positive engagement.
• Measurement of the added value of ESG.
• A clear framework to select investment managers.
The appointment provided the pension fund with a best-in-class sustainable solution, that concurred with its policy and criteria at an acceptable cost.