Your Pension Fund's ESG Policy and Strategy

What do pension funds in Australia, France, Sweden and Texas have in common? Definitely not their asset allocation, level of transparency, governance system or cost structure.

One thing they all have in common is an ESG, or Environmental, Social and Governance, policy and strategy. This might not be the priority for many retirement systems today but those working with external asset managers actually have an “implicit ESG policy and strategy." It is built into the asset manager’s asset allocation and strategy even if it is not presented as such for each client. The pension fund board should know about it and they might actually be surprised how advanced or mediocre it is.    

To get to know the pension fund’s “implicit ESG policy and strategy” the board needs to establish the current ESG status quo across all managers. The fund needs to know from each asset manager how they go about managing ESG and sustainability risks. The individual managers’ policy and strategy might be very different. Based on the weightings of managers in the overall portfolio the pension fund can establish the aggregate ESG policy.

At, we focus on best practice implementation and developed a digital questionnaire tool which is available for pension funds at no cost. The digital questionnaire provides all the relevant information on the asset manager’s ESG policy and strategy which are of interest to the pension fund executive director, board of trustees and beneficiaries. The platform offers unbiased access to asset managers globally and has the ability to run the ESG screening program for a pension fund on the level of each asset class the pension fund is invested in.

The information provided to the pension fund is extremely valuable for asset manager oversight and monitoring as well as benchmarking. It creates the basis for informed discussions with the asset manager and the relevant facts for decision-making.

Responses to the ESG screening questionnaire provide important information to learn about the ESG policy and strategy of all current managers and their competitors. The differences in terms of content, quality and depth are usually very substantial and have to be seen in the context of a detailed performance attribution analysis.  

A retirement system might have hired a manager for international equities five years ago and the manager might have been delivering great performance since then. This is what counts for most pension funds.

Five years ago the integration of ESG factors in the investment process was probably not the deciding factor for selecting this particular manager. Today, this international equity manager could actually be at the forefront of integrating ESG and sustainable investment concepts in the asset allocation without the pension fund knowing it.

Sophisticated ESG managers apply different strategies, ranging from simple exclusions and divestments to integrating ESG factors in the investment process, active ownership, engagement and impact investment. 

Pension fund may face questions on ESG policies from beneficiaries and members. An ESG screening request provides the information base to answer all relevant questions related to ESG topics.

Asset managers serving a global client base in different jurisdictions benefit from the feedback they receive from their clients and new requirements given to them. U.S. asset managers improved their ESG management capabilities substantially over the past few years and their domestic clients increasingly benefit from this.

But asset managers also face a number of challenges as sustainability concepts, standards, disclosures and reporting requirements still differ across jurisdictions. This is the time for asset managers to differentiate themselves from the peer group and to show their competence.

ESG and sustainability are areas where quality asset managers can demonstrate their strengths. In a dynamic environment asset managers adapt to changes in the marketplace on a continuous basis and pension funds should know about it.

About Albert Reiter, CFA

Albert Reiter, CFA, is the founder and CEO of Data GmbH and The company was founded in 2000 as an independent fund information provider with a strong focus on qualitative fund research and ranks among the leading providers in Germany, Austria and Switzerland. also developed, a global platform for professional investors and asset managers. Prior to his current role, Reiter was responsible for the institutional asset management business of Invesco and LGT in Austria. He also worked at Commerz Financial Products (Commerzbank) in Frankfurt with a focus on convertible bond issues and derivatives. At Southern Life Asset Management in Cape Town, South Africa, Reiter worked as Derivatives Strategist within the fund management team. He started his career at GiroCredit Bank as an Options Market Maker for equity and index derivatives. He graduated with a Business Administration and Finance degree from the University of Innsbruck and earned his MBA at the Graduate School of Business, University of Cape Town. Albert Reiter is a CFA charterholder (2001).

InvestRFP is a Vendor member of TEXPERS. The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of, nor TEXPERS. Views are subject to change over time. Follow TEXPERS on FacebookTwitter, and LinkedIn for the latest news about the public pension industry in Texas.

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