Portfolio Coverage Target

Hello SBTi community,

Our client who are classified as a FI, engage a company called Mercer, who are classed as an ‘implemented investment consultant’ (also known as a ‘multi manager fund’ or ‘outsourced chief investment officer’). Mercer account for approx. 90% of their total investment portfolio

As such, does this mean that if Mercer are to set an SBT under the SBTi, then my client will achieve (in theory) a 90% portfolio coverage target?

This is an important piece to understand in terms of setting an investment target.

Welcome to the community @MikeRhydderch,

Just because Mercer has set a portfolio coverage target it doesn’t mean that Mercer has achieved the target.
Hence, the FI needs to know how much of Mercer’s portfolio holdings have set SBTi approved targets to be able to attribute this to its own portfolio coverage. The most straightforward way to do that is to do an x-ray of the portfolio managed by Mercer and calculate the portfolio coverage as if the holdings were direct holdings by the FI. This is similar to how any FI should treat investments in e.g. mutual funds, and ETFs.
But to be able to claim 90% portfolio coverage, as in your example, Mercer needs to be able to show that it has achieved 100% portfolio coverage in its portfolio, not just that they have set a target.

Hi Donald. Thank you so much for getting back to me. That makes sense.

I have another question. I am really trying to confirm that this client actually qualifies as an FI.

The client is nib. They provide health and medical insurance to Australian and New Zealand residents, and international students and workers in Australia. We are also a global distributor of travel insurance. nib foundation is an independent charitable trust that grants funding to charities.

They do not arrange or execute deposits, loans or currency exchange.

Through their asset managers, Mercer (Australia), Nikko AM (New Zealand) and Macquarie (nib foundation), they invest in cash, shares and property.Mercer, Nikko AM and Macquarie are ‘implemented investment consultants’ (also known as a ‘multi manager fund’ or ‘outsourced chief investment officers’). They manage fund managers. They commissions Mercer, Nikko AM and Macquarie to advise and implement investment decisions on behalf of nib. They do not engage directly with the fund managers managed by Mercer, Nikko AM and Macquarie and this significantly impacts ability to influence **So am I right in thinking that this is classified as Fund of Funds and therefore optional to include **

As at 30 June 2021, the total revenue was $2.6 billion, the investment balance was $1.048 billion, and the net investment income was $51.8 million. The net investment income represents 2 per cent of total revenue

Together with Mercer, Nikko AM and Macquarie, nib reviews and determines its asset allocation annually. This means asset allocation could change as frequently as annually which further impacts ability to influence the fund managers managed by Mercer, Nikko AM and Macquarie.

**We have gone back and forth through teh guidance and we really just need someone from SBTi to definitively say “YES/NO” as to if nib are classed as an FI **

Cheers
mike

@Donald really hoping you can review the above