'Long Term Responsible Investing' (LTRI): A Factor in Manager Sales and Evaluations

'Long Term Responsible Investing' (LTRI): A Factor in Manager Sales and Evaluations

Using LTRI is not a new or boutique sales approach. For years now, mainstream institutions have marketed it through studies showing that screening for governance improves their performance. Press coverage has focused clients on this issue. A search of the word “Governance” on the Pensions & Investments web site returned 500 citations in the last two years. Recent P&I articles included the Analyzing for 'Governance Risk' editorial, Watson Wyatt Hires Environmental/Social/Governance (ESG) Specialist' and U.N.-Mercer report urges use of ESG factors. Executive pay and other governance issues are now featured daily on CNBC and retail media.

How others market LTRI - An introduction to one marketing oriented research study touts, “Corporate governance has always played an important role in Alliance Capital's investment assessments …” A recent Pensions World article by AXA IM uses quant data from GovernanceMetrics International (GMI). Other examples of marketing and academic style studies to attract clients include those by Morgan Stanley, Goldman Sachs, McKinsey, UBS, USS, the NYSE and others. The GMI Holdings Analysis can show LTRI factors in manager holdings as was done in the Lipper study, “Corporate Governance as a (positive) Factor in Mutual Funds Holdings” (2004), which used GMI data.
Industry Actions - Institutions representing $10 trillion in assets have signed the Principles for Responsible Investing (PRI) (2006). Signatories call for the assessment of external managers on their incorporation of ESG investment factors. From a marketing release, “F&C was one of the first signatories to the PRI. We are convinced that… the industry is poised for significant transformation”. A recent paper counted over 100 hedge funds employing Governance Activist strategies to turn poorly governed companies around. The top tier performance of these funds has attracted and educated clients.
Pressure on Fiduciaries - There is a movement underway to address pension fund governance. This includes how corporate governance risk factors are assessed in portfolios. A recent white paper and also a legal survey by one of the world's largest law firms suggest that the US should follow European regulations to this effect. Governance analysis is now part of the CFA curriculum and in other codes of best practice. NYCERS, plus the states of Connecticut, Maryland, and California are examples of funds that already require ESG disclosure by managers.

by Brian Connolly, Sales Director, GovernanceMetrics International. Contact: 212-949-1313 x320, bconnolly@gmiratings.com.


	'Long Term Responsible Investing' (LTRI): A Factor in Manager Sales and Evaluations Using LTRI is not a new or boutique sales approach. For years now, mainstream institutions have marketed it through studies showing that screening for governance improves their performance. Press coverage has focused clients on this issue. A search of the word “Governance” on the Pensions & Investments web site returned 500 citations in the last two years. Recent P&I articles included the Analyzing for 'Governance Risk' editorial, Watson Wyatt Hires Environmental/Social/Governance (ESG) Specialist' and U.N.-Mercer report urges use of ESG factors. Executive pay and other governance issues are now featured daily on CNBC and retail media. How others market LTRI - An introduction to one marketing oriented research study touts, “Corporate governance has always played an important role in Alliance Capital's investment assessments …” A recent Pensions World article by AXA IM uses quant data from GovernanceMetrics International (GMI). Other examples of marketing and academic style studies to attract clients include those by Morgan Stanley, Goldman Sachs, McKinsey, UBS, USS, the NYSE and others. The GMI Holdings Analysis can show LTRI factors in manager holdings as was done in the Lipper study, “Corporate Governance as a (positive) Factor in Mutual Funds Holdings” (2004), which used GMI data. Industry Actions - Institutions representing $10 trillion in assets have signed the Principles for Responsible Investing (PRI) (2006). Signatories call for the assessment of external managers on their incorporation of ESG investment factors. From a marketing release, “F&C was one of the first signatories to the PRI. We are convinced that… the industry is poised for significant transformation”. A recent paper counted over 100 hedge funds employing Governance Activist strategies to turn poorly governed companies around. The top tier performance of these funds has attracted and educated clients. Pressure on Fiduciaries - There is a movement underway to address pension fund governance. This includes how corporate governance risk factors are assessed in portfolios. A recent white paper and also a legal survey by one of the world's largest law firms suggest that the US should follow European regulations to this effect. Governance analysis is now part of the CFA curriculum and in other codes of best practice. NYCERS, plus the states of Connecticut, Maryland, and California are examples of funds that already require ESG disclosure by managers. by Brian Connolly, Sales Director, GovernanceMetrics International. Contact: 212-949-1313 x320, bconnolly@gmiratings.com. Back to the top with the Corporate Governance NETwork! Contact: James McRitchie All material on the Corporate Governance site is copyright since1995 by Corporate Governance and James McRitchie except where otherwise indicated. All rights reserved.