Institutional Asset Owners: Strategies for engaging with asset managers for impact

Institutional asset owners such as pension funds and insurance companies have an immense opportunity to deepen their engagement with external asset managers to achieve greater impact results for people and the planet. As more institutional asset owners enter the impact investing space, it will be crucial for them to better align impact incentives with asset managers at each stage of the investment process. There is, however, a gap in market knowledge regarding how institutional asset owners are engaging with external asset managers to achieve real-world impact results, alongside financial returns, particularly within an existing portfolio.

The GIIN’s research brief: Institutional Asset Owners: Strategies for engaging with asset managers for impact addresses this gap in the market. Building upon the institutional asset owner series, this second research brief explores the ways in which institutional asset owners work with asset managers to incorporate impact within their existing portfolios. The first Institutional Asset Owner brief focused on investors’ approaches to identifying impact priorities and setting targets – a critical step in enabling asset owners to assess progress relative to their goals and revise targets as needed. This new research brief reveals approaches asset owners are taking to collaborate with asset managers to achieve impact.

Drawing on quantitative and qualitative data from institutional asset owners along with qualitative data from asset managers and intermediaries, this research seeks to detail which strategies and mechanisms asset owners may need in place to align with asset managers to achieve impact across their portfolios. The research brief covers the nature of engagement with asset owners, challenges in pursuing impact alongside asset managers, and strategies to align impact incentives with external asset managers. Specifically, this research offers insights into existing practice and strategies institutional asset owners take to align with asset managers when managing impact performance. The key strategies that asset owners can employ to engage with asset managers to apply an impact lens to existing portfolios include:

• Articulating specific impact objectives or priorities;
• Codifying impact in formal investment and legal documents;
• Identifying and using standardized impact reporting systems; and
• Establishing expectations for rigorous impact reporting to enhance alignment.

Learn about these strategies and ways in which institutional asset owners are looking ahead to better align with asset managers by downloading the research brief below.