Asset Manager Due Diligence: Making Sure Your Fund Hires the Right People
When you retire, your pension check doesn't appear out of thin air. Behind it are decades of investment decisions made by asset managers and the firms your pension fund hires to grow and protect your money. Most workers never think twice about who those managers are or what they're doing with their savings. But they should.
Because the managers your fund hires are making decisions that shape markets, influence corporate behavior, and increasingly, determine whether the companies they invest in are prepared for a world of rising climate risk. A fund that hires asset managers who ignore climate risk, vote against workers' interests, or can't be held accountable is gambling with your retirement.
That's what asset manager due diligence is about. It's the process trustees use to make sure the people managing your money are actually doing right by you and asking the hard questions before the contracts get signed.
What Is Asset Manager Due Diligence?
In plain terms, due diligence is how your fund vets, selects, and monitors the managers who invest your retirement savings. It's how trustees and investment staff at the pension fund make sure those managers are doing their jobs, beyond just chasing returns, to invest responsibly and in line with what your fund actually stands for. The goal is to ensure that each manager's investment strategy, corporate engagement, and proxy voting align with the fund's fiduciary duties and long-term sustainability commitments.
Think of it Like Hiring a Contractor
Imagine you’re renovating your home. You wouldn't hire the first contractor you found online. You'd check references, review past work, and make sure they understood your vision. You'd ask:
Have they done this kind of work before?
Do they stay on budget?
Will they stand behind their work if something goes wrong?
Your pension fund goes through the same process with asset managers. The difference is that the stakes are your retirement security, and increasingly, the health of the planet you'll retire into.
Why Climate Matters to Your Fund
The world's largest asset managers control trillions of dollars. The decisions they make, such as where to invest, how to vote on shareholder resolutions, and whether to push companies to be more resilient to the growing physical and energy transition risks of climate change, shape both markets and economic outcomes. Strong due diligence processes help ensure that managers:
Integrate climate risk into investment analysis,
Engage directly with portfolio companies on emissions reduction, labor standards, and transparency, and
Vote their proxies in line with the pension’s principles, especially on key climate and governance resolutions.
The reality is that unmanaged climate risk is financial risk. And for workers who depend on their pension in retirement, that matters.
What Good Due Diligence Looks Like in Practice
Many leading pension systems already embed climate and sustainability criteria into their manager selection and oversight. CalPERS and CalSTRS, for example, have both used climate risk criteria to push asset managers toward greater transparency and accountability, resulting in stronger stewardship commitments and more consistent proxy voting on climate resolutions.
The United Nations Principles for Responsible Investment (PRI) offers practical guidance for funds seeking to embed climate and social expectations into how they hire and evaluate managers. And union-affiliated funds, including those with SEIU-aligned trustees, have begun incorporating climate risk criteria directly into manager mandates, making clear that accountability starts before the contract is signed, not after.
Questions Worth Demanding Answers To
You may not be sitting across the table from an asset manager yourself, but your trustees are, and they're there on your behalf. These are the questions that should be asked, and as a worker and union member, you have every right to expect your trustees to raise them:
How do you identify and manage climate-related financial risks in your portfolio?
How do you incorporate any financials, profitability drivers, or loss/damage potential considerations when evaluating climate risks?
How do you identify clean energy transition investment opportunities?
Can you show us examples where you've engaged a company and achieved a concrete outcome?
What would you do if your proxy voting conflicted with our fund's stated values?
A manager who can't answer these questions clearly is a red flag. And a trustee who isn't asking them is one worth talking to.
Your Retirement. Your Voice.
Trustees hold the formal power to hire and fire asset managers, but workers are the reason those funds exist in the first place. The more you understand about how due diligence works, the better equipped you are to hold your fund accountable and push for the kind of management your retirement actually deserves.
You've spent a career earning that pension. Make sure the people managing your money have to answer for it, starting before they ever get the job.
References available on request. Key sources include CalSTRS Sustainable Investment Reports, UN PRI Manager Selection Guidelines, and the UN-Convened Net-Zero Asset Owner Alliance Target Setting Protocol. The contractor analogy was generated with AI support.
