There is increasing consensus that large institutional investors should integrate responsible investing as part of their overall fiduciary framework. While some have argued that a focus on RI is incompatible with the core fiduciary responsibility of generating returns, emerging research, including a recent CEM study, suggests that the two goals are not mutually exclusive.

The assessment of responsible investing (RI) disclosures included 48 questions across the three key components outlined below. 

The review encompassed assessing annual reports, responsible investing reports, websites, and various policy disclosures. Given the relatively recent adoption of RI by many funds and the nascent global standards and reporting guidance for RI, the disclosures varied widely across funds and countries. 

1. Responsible investing framework and reporting (30% of responsible investing factor score)
Questions assessed whether disclosures laid out how RI fits into the overall strategy for the fund. This included the goals and targets for RI and whether the progress made towards these goals and targets were disclosed. The verification of RI disclosures by independent third parties and alignment with emerging global standards for RI reporting (GRI – Global Reporting Initiative; and TCFD – Task Force on Climate-related Financial Disclosures) was also considered.

2. Responsible investing governance (15% of responsible investing factor score)
For RI to be successful there needs to be accountability. The responsibilities for oversight and implementation need to be clearly laid out. Important considerations in evaluating disclosures around governance include whether RI is part of the board’s oversight and how it is integrated within the organisation including executive management oversight and whether there is a dedicated role or team.

3. Responsible investing implementation (55% of responsible investing factor score)
Evaluation of implementation disclosures covers the key policies that funds use to implement RI. Funds are scored on whether actual activities and specific metrics are provided. Key implementation policies included in the assessment are:

• Exclusion
  Disclosure of screening and monitoring criteria used to assess eligibility of investments. For instance, some funds exclude tobacco companies and list excluded investments.
• Active investing
  Disclosures around ownership policies that outline how funds engage with investees to bring about change that aligns with RI investing policies, values, and goals. For instance, funds are scored on whether disclosures around voting records, engagement statistics, etc. are provided.
• Impact investing
  Disclosures on how funds invest to promote sustainability. Assessments include whether key focus areas or goals are provided, metrics such as percentage of portfolio impacted, and examples of investments (i.e., investing in renewable energy to reduce carbon footprint).

4. ESG integration
Disclosures related to the various ways responsible investing is implemented across the portfolio, including whether RI is part of the criteria for evaluating external managers and if it is included in risk management processes.