Managing environmental social and governance (ESG) factor integration

Managing environmental social and governance (ESG) factor integration

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Speaker(s): Randy Bauslaugh (McCarthy Tétrault LLP), Hendrik Garz (Sustainalytics)

For over a decade, many pension funds, government agencies and even actuarial counsultancies have signed on to the United Nations-supported Principles of Responsible Investment (PRI). However there still appears to be considerable confusion about what that means in the context of investing institutional pension, benefit or social security funds. It also has professional implications for actuarial and other firms seeking to align their consulting approach to broader ESG objectives.

A major barrier to understanding the legal obligation of plan fiduciaries and their professional advisors seems to be the confusing language that shades the boundary between taking into account financially relevant ESG factors on the one hand and promoting ethical or socially responsible investment (SRI) behaviour for its own sake on the other. Legislation, regulatory guidance and statements from non-governmental agencies, like the UN, blur these distinctions.

The purpose of this session will be to briefly identify the core fiduciary obligations and the trends, but also to distinguish and draw a clear line between taking into account factors which may enhance financial performance or mitigate financial risk (i.e., ESG factor integration) and taking into account such factors to achieve broader social, environmental or governance goals (i.e., SRI). This will provide a basis for a panel discussion around the development of ESG disclosure and engagement rules in different jurisdictions and environments, and the practical role of actuaries and other professionals with regard to (i) technical evaluation of complex financial products, (ii) advising on investment policy development and implementation, (iii) designing complex investment platforms, and (iv) aligning their own practices with principles of responsible investment. The session could also deal with engagement strategies and how to implement ESG factor integration, giving panelists and the audience the opportunity to discuss their own experiences.

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