Sparinvest's recipe for improving PRI assessment scores

Sparinvest has become an all A-grade student in the annual assessment report from the United Nations-backed Principles for Responsible Investment (UN PRI). The asset manager's head of responsible of investment shed some light on how the score was boosted, stressing that it is the portfolio managers ­ not her ­ making the main decisions.
Nichola Marshall has worked at Sparinvest since 2007. She became head responsible investments in 2014. | Photo: PR
Nichola Marshall has worked at Sparinvest since 2007. She became head responsible investments in 2014. | Photo: PR

Every July, signatories of the UN-backed Principles for Responsible Investment receive an assessment score for their investment approach across asset classes.

The scores follow US grading, ranging from A+ as the best and F as the worst. One of the signatories is Sparinvest.

According to Nichola Marshall, Sparinvest's head of responsible investment, the UN PRI held a webinar at the beginning of August, after the reports were published:

"We were told that since July 2017, at least 248 asset owners had visited the Data Portal. Many of them will use the data for due diligence processes for asset manager searches and monitoring.

"At Sparinvest, we take the PRI reporting seriously because PRI is the world's leading organization for promoting responsible investments. Their transparency reporting process is rigorous and standardized, and thus the ratings are easily comparable and based on an in-depth consideration of what asset managers do to invest responsibly," she tells AMWatch.

Improving fixed income scores

In the 2018 edition, Sparinvest had improved its scores in the fixed income modules, as they're called, government bonds, corporates and securitized from two B's and one C to all A's.

Nichola Marshall points out that the EUR 11.4 billion investor's portfolio managers had increased their efforts on engaging with companies on ESG issues.

"Our fixed-income portfolio teams have been very active in their engagements in the past year, achieving good results. We've also been reporting on our results to clients on a quarterly basis, which is reflected in improved PRI scores," she says, and adds:

"However, we don't disclose the companies we engage with before the process is concluded. We believe that an approach built on trust and anonymity yields the best results."

Direct and collaborative engagement are key drivers

Asset managers can either engage themselves or use third-party engagement providers such as BMO GAM, GES Investment Services or Engagement International.

At Sparinvest, the policy is to combine these commonly-used methods.

"Our portfolio managers engage directly in cases where ESG issues are likely to be material to the investment case over the longer term. We use active ownership to encourage investee companies to improve sustainability by mitigating risks and seizing opportunities," Marshall says.

Sparinvest also gets involved in collaborative engagements endorsed by the PRI, for instance, the Climate Action 100+, targeting the world’s greatest greenhouse gas emitters.

"Our broad approach to engagement and active ownership is one of the reasons we've improved in the assessment scores in the last year, especially within fixed income," Marshall says.

On the modules strategy and governance, listed equity incorporation and listed active ownership Sparinvest maintained their A+, A+ and A ratings from 2017.

The 2018 median score mostly consists of Bs, except for strategy and governance (A) and fixed income securitized (C).

Consistent growth in PRI's signatories


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