Investments made on behalf of the Isle of Man Government are being constantly monitored to ensure they comply with ethical principles.
Over the past year, Treasury officials have undertaken a thorough review of how invested reserves are aligned with principles commonly referred to as ESG – environmental, social and corporate governance – or socially responsible investing.
ESG is a generic term used in capital markets and relates to how investors evaluate corporate behaviour.
Environmental factors include issues related to the use of resources and energy, the effects of pollution and climate change, and other physical challenges and opportunities.
Social factors relate to trends such as demographic changes, human rights, social attitudes, diversity, beliefs and a company’s relationship with its employees.
Corporate governance includes factors that measure the quality and integrity of a company’s internal structure and practices.
Considering factors in this way can also provide an indication of a company’s future financial performance.
Treasury Member Bill Shimmins MHK, who is chairman of the Investment Committee, said:
‘Treasury has been proactive in establishing ways to constantly monitor how the Isle of Man Government’s reserves are invested. Integrating ESG into the investment process is increasingly forming part of investor thinking globally and is set to develop further as assessment becomes more sophisticated.
‘The Investment Committee is driving the way in which ESG is used to inform decisions, and conversations are taking place with investment managers all the time on encouraging ways in which the Isle of Man Government portfolio can reflect investment in companies with good governance and responsible management.'
‘The performance of investments is critical to the future prosperity of the Island, and many factors are taken into consideration when assessing the suitability of a particular industry or sector. Many oil and gas companies, for example, are investing heavily in renewable energy solutions and a sustainable future, and this must not be ignored.
‘A balance must therefore be struck between being mindful of concerns while providing managers with the independence necessary to ensure an effective return on the funds invested.’
The Isle of Man Government currently employs the services of five investment management companies which look after reserves totalling £1.6 billion, a net increase of more than 4.2% over the previous financial year.