Fiduciary management ESG beliefs and policies
1. Does the fiduciary manager’s views on ESG align with your beliefs?
2. Have they demonstrated commitment to those beliefs by associating or participating in industry-level collaborations and initiatives?
3. Is the fiduciary management provider staying abreast of regulatory changes in this area?
Fiduciary management ESG Investment decisions
4. Are ESG factors integrated at every stage of their investment process? What are some examples of how ESG factors are considered?
5. Do they assess portfolio exposure to climate risks? How are they managing climate change risks and opportunities on your behalf?
Climate change poses a systematic risk and investors should consider the potential financial impacts of both the associated transition to a low-carbon economy and the physical impacts of different climate outcomes.
Given this materiality, when considering what questions to ask about fiduciary management services, you should seek transparency from your fiduciary manager on how climate change risks and opportunities are implemented in your portfolio, and the wider impact of your investment.
6. How are ESG factors considered in asset allocation, portfolio management and manager selection? Is this approach consistent across the underlying asset managers used?
Implementing a responsible investment approach is most effective when it is integrated throughout the asset allocation and investment process, thus providing additional layers of insight and oversight. There is an added level of complexity to this when using fiduciary management services, given the moving parts involved. Fiduciary management providers should be expected to clearly demonstrate:
- The analysis and tools they are using to facilitate the investment decisions process, for example, climate stress testing for when considering climate change temperature deviation scenarios.
- Whether there are dedicated sustainability-driven investments and if not, why not.
- Their assessments of the underlying managers’ ESG capabilities.
- The processes and monitoring of key ESG-related metrics in place for portfolio managers.
Fiduciary management ESG Engagement
7. What is their approach to voting on securities within your portfolio?
8. Can your fiduciary manager demonstrate how their ESG approach has added value for you, especially in a period where the interest in ESG has “surged” significantly?
The focus on ESG is only likely to increase in the near future, so it is essential that you ask a fiduciary management provider how ESG considerations are integrated throughout your investment decision-making.
Fiduciary managers should be utilising all the tools at their disposal to ensure your portfolio is seizing all the opportunities and managing all the risks presented by ESG factors, whether its investment in dedicated sustainable investments, relationships with asset managers, involvement in industry initiatives, or utilisation of the many ESG data platforms available.
Ultimately, fiduciary management will continue to provide transparency and effective governance at a time when it is needed most as investors need to comply with an ever-increasing number of regulatory requirements. A fiduciary manager will have the tools to help you navigate this area of investment seamlessly and remain ahead, but be sure to continuously review the alignment of your beliefs with theirs.
If you want to know how well you are currently integrating ESG considerations into your overall decision making and identify areas for intervention that will deliver a positive impact for your investment portfolio, visit our Responsible Investment Total Evaluation webpage or contact Helen Hope.
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