In their capacity of investors, funds would welcome more harmonisation in the disclosure/reporting made by companies with respect to compliance with ESG standards. This would enable asset managers to more easily screen issuers pursuant to non-financial criteria, ALFI states.
According to ALFI, the best practices as regards internal corporate governance processes to ensure proper reliability of the disclosed information include setting up an independent committee, sustainability reporting using the GRI’s Sustainability Reporting Standards and reliance on independent third parties such as label/rating agencies, auditors (non-financial audit), regulators.
In impact-focused investment funds some institutional investors have developed metrics and remuneration tools which link part of the remuneration to non-financial performance.
In order to link remuneration to non-financial criteria in an -as objective as possible manner- impact performance tools shall be selected (for instance the Outcomes Matrix developed by Big Society Capital).
The most tangible evidence of this new approach to fund manager remuneration linked to impact performance is implemented in the social impact space by the Social Impact Accelerator Fund-of-Funds run by European Investment Fund who applies the Gamma model to link the fund manager’s profit share to the portfolio’s impact results.
One could argue that if ESG considerations are truly integrated into investment decisions, they will be reflected in improved performance and that is usually the way in which asset managers are selected and their fund managers remunerated.
Full ALFI response
© ALFI - Association of the Luxembourg Fund Industry
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