Environmental, Social, Governance (“ESG”) investing is a rapidly growing area of focus for investors, particularly among the sovereign wealth, public and corporate pension, and endowment and foundation communities.
With increasing attention from some of the world’s largest asset owners, the accuracy and quality of Asset Manager ESG integration is now under close scrutiny. Manager supplied ESG data is a great start to the due diligence process, but self-reported, unverified information should clearly be subject to more thorough due diligence. In particular, investors are wary of “greenwashing”, when an asset manager exaggerates the extent of ESG integration.
Castle Hall has leveraged our decade plus history of award-winning operational due diligence to create ESGDiligence. This new tool offers investors a systematic and efficient process to evaluate ESG risks across an external manager portfolio.
ESGDiligence has two components:
How do investment managers incorporate ESG into their own businesses?
A tool to assess how an Asset Manager integrates responsible investing considerations within their strategy.
The Asset Manager is a vendor to the institutional investor, offering an investment product or service. Does the vendor – the management firm – implement responsible business practices in areas such as the environment, diversity and benefits offered to employees? Has the manager had any claims or actions related to workplace misbehavior?
Castle Hall’s Responsible Investment Manager ESGDIligence gathers a broad range of ESG data at the management company level, covering nine areas:
For a specific strategy, what is the investment process around environmental, social and governance factors? Does the investment manager have an ESG policy, and is there tangible evidence of active consideration of E, S and G characteristics when building a portfolio? Is ESG research and its impact on individual investment decisions documented? Does the investment manager have sufficient resources – people and systems - to meaningfully integrate ESG factors into portfolio construction?
Castle Hall’s Responsible Investment ESG Diligence covers the following areas: