When we look for fund managers to run our mandates our requirements cover what we expect from them in managing ESG risks and opportunities.
This includes how they assess and incorporate ESG factors in their investment process and their voting and engagement activities.
We expect our fund managers to demonstrate how both managing the risks and harnessing the opportunities can enhance the long-term risk and return of our investments.
Where appropriate we can award focused ESG mandates. These remove high risk investments prevalent in a certain asset class. For example, we procured an emerging market equities fund that doesn’t invest in companies with the largest ESG risks.
Fund managers regularly report progress of their activities. You can read about progress in our Quarterly investment reports.
Active ownership is about how we engage with companies to support better ESG performance and how we vote the shares we look after on NEST members’ behalf.
Most shares give their owners a right to vote on some company decisions, including things like whether to take over another company or approve the amount senior executives are paid. Voting usually takes place at each company’s AGM.
Our fund managers vote the shares NEST owns on behalf of our members in line with their own firm’s voting policies. However we’ve also developed our own voting and engagement policy. This sets out a NEST viewpoint on important areas and tells our fund managers how we expect companies to consider key issues.
Where we don’t agree on how our global equity fund manager plans to vote on an issue we feel strongly about, we can override this and vote in accordance with NEST’s views.
Each year we publish our Voting summary report setting out how all our fund managers have voted and how this compares to NEST’s voting policy.
You can find out more about our engagement activities in the case studies below. Our fund managers’ reports are available at the bottom of this page.
Read our Active ownership policy (PDF)
Read the latest proxy voting report (PDF)
Read the previous reports
NEST proxy voting report 2015
NEST proxy voting report 2013
NEST has developed a risk management model to identify where companies we invest in have a poor ESG performance and to help them improve their performance. The model scores companies on their environmental, social, governance and financial performance.
The model has helped us identify and prioritise three key risks:
- how companies treat the environment: we’re addressing this through a focus on companies’ greenhouse gas emissions that contribute to climate change
- how companies interact with others: we’re addressing this through a focus on conduct, culture, and staff reward and progression
- how companies lead and organise themselves: we’re addressing this through a focus on audit and dividends that contribute to public and investor confidence and trust
As we grow and our investment function evolves, we will begin to incorporate ESG risk factors into our asset allocation decisions more prominently. This could include, for example, how we’ll manage our exposure to carbon intensive stocks as the world moves to a low carbon economy.
For the time being, our activities as a responsible investor are mostly focused on the other elements described.