CIPFA has partnered with Isio to help local government pension funds assess and manage environmental, social and governance (ESG) risks.
The Investment Assessment Matrix uses five key assessment criteria to show LGPS fund managers how they can identify, integrate and manage ESG risks and opportunities in their mandates. The five criteria are: investment approach and framework; risk management; voting and engagement; reporting; and collaboration.
The matrix reports the overall ESG capabilities for each mandate, highlights specific areas for improvement and proposes actions to inform targeted engagement with the underlying investment managers.
It also provides a numerical score assigned under each criteria, an overall ESG score and a separate climate rating score. These scores allow for aggregation to the portfolio level while aiding comparability across investment mandates and potential benchmarking of LGPS funds. The ability to track progress over time is also enabled.
Urrffa Rafiq, National LGPS Lead at Isio, said:
“We are delighted to work with CIPFA to launch this approach for LGPS funds which have an important role in influencing positive changes in society through ESG investing. Given the continued focus on ESG, our approach to assessing an ESG manager’s capabilities is truly independent, transparent, highlights areas for improvement and recommends refinements that will be industry wide.”
Nicholas Harvey, Pensions and Treasury Advisor at CIPFA, said:
“CIPFA has a long tradition of providing support and thought leadership to public bodies, including LGPS Funds, and we believe this ESG Investment Assessment Matrix provides full alignment and transparency against the current and expected regulatory requirements.
“LGPS funds having access to a truly independent assessment of investment managers’ ESG capabilities, that sets out tangible actions, can only lead to improvements that will add value and allow benchmarking across funds. We hope this drives positive change through the industry and wider society.”
NOTES TO EDITOR:
Isio is a leading UK pensions advisory firm which combines actuarial expertise, third party administration, investment consulting and defined contribution specialism to deliver better outcomes for pension scheme sponsors, trustees and members. Isio, formerly KPMG’s UK pensions practice and backed by Exponent, was launched in March 2020 to apply our years of experience with a new approach and way of thinking. Isio aims to deliver clearer, simpler pensions and investment advice in a more personal way, backed by technical expertise and underpinned by proprietary technology. www.isio.com