Mercer IC Broadens Manager Exam Criteria

October 17, 2005 ( - Mercer Investment Consulting (Mercer IC) is now taking a more comprehensive look at investment managers to include a variety of social and corporate governance issues.

A Mercer IC news release said the company’s research will now include the manager’s performance on “active ownership” practices such as proxy voting and shareholder engagement. It is also including in the examination the extent of a manager’s environmental, social, and corporate governance (ESG) analysis as part of his or her mainstream decision making.

According to the news release, institutional asset owners are increasingly behaving as active owners of capital while agrowing number of investors believe that ESG issues can impact the earnings of portfolio companies.

“In the past, it was just a small group of organizations that were interested in active ownership and ESG analysis. But there are a growing number of mainstream investors who believe these issues can have an impact on long-term investment performance,” Tim Gardener, global leader of Mercer IC, said in the news release.

Using its proprietary methodology, Mercer IC has to date analyzed 30 investment managers rated highly for their UK and/or global equity products. These managers have responsibility for assets in excess of $12 trillion and cover a wide spectrum of firms, from small regional boutique equity specialists managing $134 million to larger national firms managing over a trillion in assets.

Managers were scored according to their capacity and capabilities in three new areas:

  • voting and engagement on corporate governance issues
  • voting and engagement on environmental and social issues
  • integration of ESG issues into investment decision making processes.

The initial phase of research found that, overall, managers show greater capacity and capability for voting and engaging with management on corporate governance related issues than on environmental or social issues.

While there is no relationship between firm size and scoring, there is a positive correlation between overall rating and the resources investment managers commit to active ownership and ESG, Mercer IC said. Firms scoring higher overall commit more staff to this area, and the purchase of external ESG research also appears to produce a positive ratings effect.

More information is  here