A new initiative from City of London Investment Management Company Limited (CLIM) is to promote Environmental, Social and Governance (ESG) awareness in emerging market investment trusts and closed end funds (CEFs).
CLIM firmly believes that businesses which adopt best practice in their ESG policies will ultimately earn better returns and will use Sustainalytics ESG research as the basis for its work with investment managers.
Barry M Olliff, CEO & CIO of CLIM, says: "We have a unique opportunity from a bottom up, and a top down, perspective to positively influence investment managers and Boards of Directors regarding ESG issues that is significantly disproportionate to our actual ownership."
This includes 85% of the securities managed by CLIM on behalf of its clients, including more than 80 CEFs managed by over 40 fund management companies who themselves manage in excess of USD12 trillion of assets.
Sustainalytics will provide analytical ESG reports and a portfolio scoring methodology to assist CLIM in raising ESG awareness among investment companies and their Boards of Directors.
CLIM cannot screen out securities in the various CEF's according to ESG variables but it can encourage greater transparency from CEF investment managers. The CLIM Research and Corporate Governance teams will work with Sustainalytics to measure progress on adopting ESG criteria within each portfolio over annual scoring periods. This project will involve no change to CLIM's investment process which has continued to develop over the years.
CLIM's intention is to encourage CEF investment managers to be more explicit about how ESG considerations are integrated into their investment processes thereby participating in the expected superior returns emanating from the performance of these securities as ESG factors become more material to total returns. At the beginning of March CLIM will start presentations with investment consultants and clients to update them on this initiative.