Understand due diligence activities and considerations to effectively assess the ESG characteristics of an investment strategy and fund.
Environmental, Social and Governance issues have become a key due diligence priority. Global issues such as climate change, resource scarcity, income inequality, diversity and corruption have led many businesses to fundamentally change their corporate strategy.
The financial services and asset management industries are also impacted by this fundamentally different business environment. On the buy side, leading investors now consider Environmental, Social and Governance (“ESG”) factors on many levels. Investors may measure and set specific targets to reduce the carbon footprint of their overall portfolios, or may engage with portfolio companies to improve their behaviour and disclosure of ESG data.
Against this background, investors are transitioning to conduct more detailed due diligence on the ESG capabilities of asset managers in their portfolios or proposed for new allocation. Manager supplied data on ESG topics is a great start to the due diligence process, but self-reported, unverified data should clearly be subject to more thorough analysis. In particular, investors are wary of “greenwashing”, when an asset manager exaggerates the extent of ESG integration. Distinguishing virtue signaling from a genuine commitment to sustainable investment has become a new focus in the external manager selection process.
Evaluating the Responsible Investment Strategy incorporates 10 categories of ESG risks as a framework for comprehensive ESG analysis of the asset manager's strategy.
- Strategy Overview
- Responsible Investing Policy and Organization
- Responsible Investing Resources
- Performance Attribution and Outcomes
- Social - Responsible Investing Implementation
- Governance - Responsible Investing Implementation
- Execution of Responsible Investing Strategies
- Environment and Climate Change - Responsible Investing Implementation
- Ongoing Monitoring
- Communication and Transparency
Visit Castle Hall's Due Diligence University to download our ESG - Responsible Investment Strategy whitepaper and other resources, or contact us to learn how Castle Hall can help allocators build and implement risk-based due diligence policies and programs.
Learn more about Castle Halls 3 Steps to Effective Due Diligence.
We hope the DiligenceHub Help Center will provide quick answers to your questions as you as you begin to use the app. Please browse the articles at your convenience - and, of course, feel free to send a support ticket or live chat with our team if you have questions at any time.