EUROPE - The group of pension funds and fund managers undertaking an initiative in which they will allocate 5% of their research budget to socially responsible investment (SRI) issues have laid down the criteria they will use to evaluate broker performance.
The founding members of the Enhanced Analytics Initiative (EAI), who collectively have e330bn assets under management, include Dutch pension fund for healthcare and social workers, PGGM, the Universities Superannuation Scheme (USS), BNP Paribas Asset Management, Deutsche Investment Trust and Dresdnerbank Investment Management and RCM.
Under the initiative, the group will allocate 5% of their broker commissions on the basis of how well brokers integrate analysis of extra-financials and intangibles, including corporate governance, human capital management, value creation or destruction during mergers and acquisitions, or global environmental challenges such as climate change.
At a meeting in London, brokers were briefed on performance evaluation criteria comprising comprehensiveness of analysis, assessment that permits comparison between companies, integration of results of financial and extra-financial analysis and responsiveness of the service.
The fund managers also told brokers how allocations for 2005 would be informed by a baseline evaluation being undertaken by an independent consultant, Ivo Knoepfel.
Måns Lönnroth, CEO of Swedish research foundation Mistra, commented: “On the basis of what we have learned from our research into sustainable development, we believe that there is an urgent need to understand and incorporate non-financial issues into the investment process much more broadly than is currently common practice.
“Brokers can be a big part of the way forward and we hope this initiative will ultimately improve the way assets are managed.”
RCM CIO Neil Dwane (pictured) added: “This is not about getting a few more brokers to produce some more bespoke SRI research. This is the start of a process to create a business case for brokers to want to integrate analysis of intangibles into their mainstream process.”
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