Part of an interview series with Zurich Insurance Group, The Pensions Trust, California State Teachers’ Retirement System (CalSTRS) and Environment Agency Pension Fund on selecting, appointing and monitoring managers

Do you include ESG terms in IMAs?

We include ESG terms that say managers’ investment analysis should cover 21 pre-defined ESG risk factors: monetary transparency; data dissemination; accounting; payment system: Central Bank; securities regulation; auditing; fiscal transparency; corporate governance; banking supervision; payment system: principles; insolvency framework; money laundering; insurance supervision; respect for human rights; respect for civil liberties; respect for political rights; discrimination based on race, sex, disability, language, or social status; worker rights; environmental; war/conflicts/acts of terrorism; human health.

While the list does not attempt to identify all forms of risk that could be appropriate for any given investment transaction, they do provide a framework of to avoid any of these widely relevant factors being overlooked.

Managers have to affirm at least annually that they have considered the factors when making investment decisions on our behalf. For several years now, the ESG term has been included in new mandates. It has been tougher to change existing mandates to include these terms, however it is getting easier and we ask some existing managers to affirm that they consider the 21 ESG risk factors without revising the original mandate.

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    A practical guide to ESG integration for equity investing

    September 2016