NEST calls for higher environmental and corporate governance standards on behalf of millions of UK investors

NEST, the national workplace pension scheme investing on behalf of over 5million UK workers, is tackling climate change, executive pay and boardroom diversity across its £2bn portfolio to drive better returns for members.

NEST’s annual responsible investment report, published today (Monday 11 September), marks the progress the scheme has made in these areas over the last year and how it is helping change attitudes in the fund management industry more widely.

Highlights from 2017 include:

• £27.2m more invested in companies that are positioned to benefit from a global transition to a low carbon economy, such as renewables companies PG&E and Iberdola and green technology companies such as Vestas Wind Systems and Siemens Gamesa Renewable Energy.
• £27.2m withdrawn from companies that are not making progress on adapting for a low-carbon future and pose a risk to members’ returns.
• 291 votes against management at companies NEST invests in to the end of Q1 2017. NEST voted independently on 18 votes, including against executive pay at Barclays and in response to poor progress on gender diversity at Glencore.
• 60 shareholder resolutions supported on environmental issues to encourage companies to disclose how they’re managing climate risks and how they’re preparing for the global energy transition.
• Initiatives taken forward to improve banking conduct and culture based on lessons from the financial crisis. 

Commenting, Mark Fawcett, Chief Investment Officer, said,
‘We’re concerned about elements of corporate pay. Executive pay can’t be set in a vacuum. If pay is disproportionate, incentives are opaque or in some cases pay policies are being structured to get around the rules, these pose clear risks to long term investors like our members. We’ve also taken a strong stance on gender diversity. Gender diversity at board level is a proven factor in better corporate performance, so we should be worrying about male-dominated boards that might undermine returns for our members.

‘While we’re closely scrutinising issues that pose a particular risk to our members’ pots, we’re encouraged by the step change improvement in how our fund managers are voting across the board on things like executive pay, gender diversity and climate change. This is good news for our members and millions of other UK investors as a rising tide will lift all boats. We want to see the industry continue to work together and push for higher standards so all pension savers can benefit from a more profitable, sustainable and environmentally sound capitalism.’

NEST invests the pensions of 5.4million workers automatically enrolled by over 440,000 employers across the country. Survey evidence shows employers are mindful of how pension schemes manage environmental, social and governance issues affecting members’ investments. Of employers surveyed in 2017 on behalf of NEST*:

• over a quarter said they looked for a responsible investment approach as a sign of high quality when choosing their auto enrolment pension scheme
• 11 per cent consider a responsible investment strategy a priority for their pension scheme, compared to just 1 per cent who said offering a range of fund choices was a priority

*Research conducted by Engaged Investor in May 2017 among 61 UK employers with collectively hundreds of thousands of employees.