Institutional clients of Mercer Investment Consulting Inc. will have another screen at their disposal as it adds environmental, social and corporate governance factors in evaluating investment managers. A "growing number of investors believe that ESG issues can have an impact on the earnings of portfolio companies and, therefore, on investment performance, and so should be integrated into investment analysis" of investment managers, according to a Mercer statement.
The new ESG factors will "stand alongside" existing criteria Mercer uses to evaluate money managers for clients, said Jane Ambachtsheer, global head of socially responsible investment, based in Toronto, who is leading the evaluation effort for Mercer. The ESG factors "will not have a formal role in the rating of investment managers," she added, but will instead serve as an additional screen of managers for clients who wish to use it.
In the past year, Mercer has evaluated 30 U.S. and U.K. global managers, whose assets total $12 trillion, she said. Each manager ranges in size of assets under management from $134 billion to more than $1 trillion. Mercer expects to evaluate 70 more managers based in the U.S., Canada, Australia and Europe by the end of year, she said.
"The reality is some investors feel ESG is important and other investors feel it is less important," Ms. Ambachtsheer said. "Now we have the research to help clients look at these areas" in money management firms.
She couldn't say what percentage of Mercer clients are interested in ESG evaluation.
Mercer was drawn into providing the new evaluation factors by the growing number of institutional investors who believe ESG issues can impact corporate business and investment performance and thus should be more integrated into investment analysis.
Interest comes from public and union pension funds, endowment funds, and faith-based institutions, she said. She couldn't say why corporate pension funds haven't expressed interest.