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10 August 2016

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NEST publishes its first responsible investment report

NEST has today, 10 August 2016, released its first responsible investment report, Working for change. The report sets out how NEST incorporates environmental, social and governance (ESG) risk factors when looking after members’ money, to boost and protect their pots.

The report outlines how NEST represents millions of members who now have a stake in companies and markets around the world for the first time, thanks to auto enrolment. This includes engaging directly with companies, regulators and industry bodies. It also involves working closely with our fund managers and other large institutional investors in order to increase our effectiveness.

Working for change includes four case studies setting out how NEST looks to understand and act on a variety of issues that have an impact on long-term returns, sustainable markets and good business practices:

  • climate change and managing the transition to a low carbon economy
  • banking culture and conduct and how this can impact on performance  
  • the quality of company audits and the interaction between shareholders and auditors
  • the role of pay in company performance.

The scheme believes incorporating ESG factors into its investment process across all the NEST Retirement Date Funds and fund choices improves long-term returns and reduces investment risk for all its members. NEST also believes it’s important to be transparent about our activities and start a dialogue with our membership about how we are acting as an owner on their behalf. This report is a step towards that goal.

Mark Fawcett, NEST chief investment officer, said:

‘We think good quality master trusts have a responsibility to take an active interest in where members’ money is invested and act on behalf of their members as owners of securities. That means considering a broad range of  investment risks and opportunities, including issues like the move to a low carbon economy, the way corporations treat the planet and how companies conduct themselves. Anyone who thinks this isn’t relevant to long-term wealth creation should consider the billions in fines and damages imposed on large sectors of the banking industry in recent times. Companies that are well run, with engaged and active investors, are more likely to be successful in the long term.’

Catherine Howarth, chief executive of ShareAction, said:

‘From very early in its journey, NEST has been open about its intention to become a world class responsible investor. The results of this effort are now becoming visible in Nest's first report on its responsible investment activity.

‘As a member of NEST, which is the scheme used by ShareAction, I particularly appreciate the report's case studies on NEST's priority areas for responsible investment. These give a tangible sense of what is being achieved through the policy. As NEST grows we hope and expect even more to be achieved, both to protect our assets and to reflect our broader interest in responsible behaviour by companies that NEST invests in on our behalf.’