Mercer unveiled Monday a ratings system of passive investment management strategies to identify managers’ active stewardship practices to integrate environmental, social and governance risks, a news release from the consultant said.
Mercer plans to use its new ESG ratings to help clients make “better informed selections of managers” by assessing the extent to which they consider ESG risks in their passive management process, the news release said.
The ratings rank passive investment strategies on their leadership in ESG integration though proxy voting and engagement activities, among other factors.
“Mercer has rated 90% of its clients’ passive equity strategy holdings” and “none received the highest rating,” the release said. Mercer did not release the ratings.
Because passive managers “can’t walk away from companies that underperform, engagement with companies should be a core function for investment firms that manage passive strategies,” the release said.
Research shows engagement can lead to improved performance, the release said.
Alayna Francis, Mercer spokeswoman, couldn’t be reached for comment.