NEST (see notes below) today announced a number of developments that help deliver on its commitment to act as a responsible owner of assets on behalf of NEST members, namely:

• signing the Financial Reporting Council's Stewardship Code, following the signing of the United Nations-backed Principles for Responsible Investment earlier this year. The FRC Code sets out good practice on engagement between institutional investors and companies. Adhering to the FRC Code will involve NEST exercising its voting rights and actively engaging with its investee companies with the aim of reducing risk and improving long-term returns for members.
• announcing EIRIS as the successful bidder for a contract to provide NEST with an environmental, social and governance (ESG) data services. This will give NEST a richer understanding of the ESG risks and opportunities contained within the assets it manages for its members. The service will be used for monitoring underlying portfolios and informing voting and engagement activities
• becoming an affiliate of the UK Sustainable Investment and Finance Association (UKSIF), enabling NEST to join co-operative efforts to influence policy makers on behalf of sustainable and responsible finance.

NEST Chief Investment Officer Mark Fawcett said:

'NEST aspires to a world class responsible investment approach. We firmly believe that environmental, social and governance issues should be factored into investment processes in order to act in the best financial interests of our members. Our research points to responsible investment providing long-term value, reducing risk and contributing towards better member outcomes.'

'As part of our commitment to being a responsible owner and investor, NEST will exercise its voting rights in an informed manner via its fund managers and actively engage with its investee companies to meet and exceed standards of good practice as set out in the FRC's Stewardship Code and the United Nations-backed Principles for Responsible Investment.'

FRC Chair Baroness Hogg said:

'DC pension schemes, as significant holders of UK equities, are an increasingly important group of signatories to the Stewardship Code, and the FRC is pleased to see NEST join with the other owners who are publicly committed to exercising their stewardship responsibilities in the interests of their beneficiaries.'

Background on NEST’s ESG data provider

NEST expects to hold many company shares on behalf of its members for a long period of time, so it's important to analyse the ESG factors that have an impact on their performance.

ESG data provides information that allows NEST to understand more about the firms it is invested in, how well they are managed and how they are shaping the societies and environments they influence.

Without ESG data, we will not fully understand potentially important and material aspects of company performance. ESG data, together with financial information, provides a more complete picture of investment risk and performance.

Environmental data covers a broad range of considerations including:

• environmental impact and the policies a company has in place to manage this impact, how the company implements these policies and also reports on their environmental impacts
• resource management and pollution prevention, for example, whether or not a company has a robust and comprehensive strategy for managing its pollution levels and reporting how they are implementing them
• reduced emissions and climate change impact, for example, a company's turnover that is largely derived from oil and gas would be expected to have a robust management response to managing its carbon emissions.

Social data covers a broad range of considerations including:

• how far a company 'gives back to the community'
• how far a company exploits its workers, or operates in countries where unions are suppressed
• how far a company's activities displace or otherwise create imposition for local communities
• labour rights.

Governance data looks at how well companies are run, for example:

• Are Directors paid high salaries even when the company performs poorly?
• Are there robust risk management frameworks in place?
• Is the company a diverse meritocracy?

EIRIS is a leading global provider of independent research into the environmental, social, governance (ESG) and ethical performance of companies.

Media contacts

Financial Reporting Council
Oliver Parry
020 7492 2397/07768502332
o.parry@frc.org.uk

EIRIS
Mark Robertson
20 7840 5741/07725 594 537
mark.robertson@eiris.org

UKSIF
Catalina Secreteanu
020 7749 9950
catalina.secreteanu@uksif.org

Notes - We use the term NEST to refer to the scheme's legal name, the National Employment Savings Trust. We sometimes also use it to refer to the scheme's trustee, the National Employment Savings Trust Corporation.