ESG & Stewardship: Questions

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1. Assessment of current approach and requirements

Questions for trustees

• How can we develop our understanding in this area up to a level that means I can meet my fiduciary duties?
• Do we have a good feel for the extent to which ESG is already integrated in our investment decision-making?
• Are we satisfied with our current approach to stewardship? Do we currently set the right level of expectations for our managers regarding any outsourced stewardship activities? 
• When was the last time we asked our advisers and managers about ESG?
• Are we comfortable with the ESG profile of the assets we are invested in (e.g. what activities certain companies do and how they do them), and do we think members would be comfortable if asked?

Questions for advisers and lawyers

• What are our legal obligations?
• What support can you provide us with? What support do you think is appropriate given the resources available to our scheme?
• How do you distinguish between financially material and non-financially material matters?
• What do you think are the most financially material ESG issues for our portfolio and why?
• What is your approach to manager research? Do you have explicit ESG ratings?

Questions for managers

• How are ESG matters considered as part of the investment process?
• Which sustainability industry groups are you a member of and what does this mean for me as an investor in your fund? To what extent do you undertake collective or collaborative engagement with other investors or organisations?
• How are you incorporating and reporting against our investment beliefs?
• How is your approach to ESG and stewardship evolving in response to the surge of interest in this issue? What might this mean for our current investments?

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2. Training and education

Questions for trustees

• How much time do we need to set aside to build the necessary level of understanding in this area?
• Who should we invite to provide and receive training?
• Are there any particular ESG factors that we consider essential for our investment managers to take into consideration?
• Do we want our managers to just manage risks or actively seek out opportunities? 

Questions for advisers

• What are the legal requirements?
• What evidence is there to support the view that ESG issues, climate change and stewardship are financially material?
• To what extent can we, and should we delegate decision making in this area?
• How can I consider climate change? Should we treat it separately from ESG and stewardship?

Questions for managers

• What do you think are the most financially material ESG risks to our portfolio and why?
• How are you managing climate change risk and opportunities on our behalf?
• In what ways are you influencing companies on our behalf?
• What is your approach to voting in pooled funds? 
• Can we direct how our votes are used in pooled funds?
• Describe a situation where you engaged with a company, the process you followed and the end outcome?

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3. Ascertaining and agreeing investment beliefs

Questions for trustees

• What are our strategic aims and investment objectives? How should these frame our approach to incorporation of ESG, climate change and stewardship? 
• Do we feel confident that the trustee beliefs survey has successfully captured our views and was pitched in the right way?

Questions for advisers

• How can we overcome any behavioural biases?
• Are our proposed beliefs actionable and implementable? What are the foreseeable impacts and consequences?
• What are our options if we want to take into account member views?

Questions for managers

• What are your beliefs in this area and why?
• Are our proposed beliefs actionable and implementable?

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4. Setting the policy

Questions for trustees

• Are we comfortable with our current SIP? Does it accurately represent our approach to considering financially material ESG factors as well as our engagement and voting activities? 
• What additional information, if any, are we comfortable setting out in a document that may become publicly available? 
• Should we consider producing a separate document which is aimed at scheme members? 

Questions for advisers

• How much detail should we go into? 
• What belongs in a SIP and what belongs in a separate policy? 
• How are you going to help us deliver our policies?

Questions for managers

• We are looking to include certain wording in our SIP, could you please confirm that where applicable, you are able to support us to deliver our objectives? 
• Are your policies on ESG, climate change and stewardship publicly available

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5. Methods of implementation

Questions for trustees

• Do we feel comfortable with our proposed plans for implementing the policy?
• If we have a DC scheme, have we considered ESG and stewardship approaches for both the default and self-select options?
• Have we got the correct fund range to cater for our DC members’ needs?
• Do our investment managers (and the mandates we have employed them for) align with our investment beliefs and operate in a manner consistent with our SIP?
• Should we consider changing one or more of our managers to better align our investments with our beliefs and SIP?

Questions for advisers

• Can we keep the same risk/return structure with deeper ESG ratings? What can we do differently?
• Are we tracking the right indices? Are there other indices that we could use?
• Are our investments aligned with our investment beliefs?
• Are we tracking the correct indices across our passive funds?
• How do you think about ESG, climate change and stewardship as part of asset allocation, manager selection and implementation?
• Can you explain how your manager ratings work, and how they take account of ESG, climate change and stewardship?
• What asset class and/or manager should we be focusing our attention on first?
• Should our approach be different for current and future mandates? And should this approach vary by asset class?
• At what point should we engage with managers around ESG issues (i.e. at the on-boarding or the ongoing management stage) and how does this vary by asset class? What happens if the manager does not act upon our mandate?

Questions for managers

• What are your credentials in the ESG and stewardship area for the assets we have invested in, or may invest, with you?
• What data and research do you use on ESG, climate change and stewardship? Can you give me an example of how the data and research was undertaken and how it influenced your decision making?
• How do you take climate change opportunities and risks into account within your investment process? Can you give me a concrete example of when you have done so and what the outcome has been so far?

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6. Monitoring and reporting

Questions for self

• Are we getting the reporting we want from our managers?
• Have our actions been consistent with the policies agreed and documented in our SIP (or related policies)?
• What are we telling our members and should we be telling them more?
• Have we sufficient oversight on, and reporting from, advisers and managers?
• Do we properly understand the reports we are receiving, and the work that any advisers do in order to produce them for us?

Questions for adviser

• What proportion of the portfolio can we currently cover in our reporting?
• Where across my portfolio are my biggest ESG risks and what is your strategy for how we should mitigate these in line with our investment beliefs and principles? 
• On what proportion of my portfolio am I receiving ESG and stewardship related reporting?
• How frequently should we review our ESG and stewardship beliefs?

Questions for managers

• Relevant to the fund we are invested in, please can you set out one example where you have:
  • Invested due to ESG and stewardship considerations?
  • Not invested or disinvested due to ESG and stewardship considerations?
  • Engaged with companies on ESG issues?Used your vote on an ESG or other issue?
  • Managed a conflict of interest?
• What are the main ESG risks for X asset, and how did you get comfortable with them in order to invest? How did you engage and vote on Y issue and how does doing so align with our investment beliefs and objectives?
• How has the portfolio evolved over the last year, and has the ESG focus of the portfolio changed significantly?
• Can you provide an example where you voted against management and explain why?
• Has your approach to ESG added value, and how can you demonstrate that?
• Can you describe your governance arrangements for dealing with conflict of interest that may arise from your stewardship activities?

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