Responsible Investment

Responsible Investment

Investment Consulting

Responsible Investment

Responsible Investment (RI) is focused on the integration of environmental, social & corporate governance (ESG) and climate change in the investment process, recognising the material impact on long-term risk and return outcomes. Mercer has been at the forefront of Responsible Investment since forming a global investment advisory team of RI specialists in 2004. 

Why Responsible Investment? Investor interests are best served by investing in sustainable financial, social and environmental systems and companies. Growing stresses across those systems – such as climate change, cyber risk, and involuntary migration – create both risk and opportunity for investors. This is driving an increased focus on sustainability and new investment implementation approaches. 

Mercer believes:

  • ESG factors can have a material impact on long-term risk and return outcomes and should be integrated into the investment process.
  • Taking a broader and longer-term perspective on risk, including identifying sustainability themes and trends, is likely to lead to improved risk management and new investment opportunities.
  • Climate change poses a systemic risk, and investors should consider the potential financial impacts of both the associated transition to a low-carbon economy and the physical impacts of different climate outcomes.
  • Active ownership helps the realisation of long-term shareholder value by providing investors with an opportunity to enhance the value of companies and markets.

Stewardship and the Mercer Sustainable Growth Framework
Investment stewardship over assets is important for maintaining sustainable growth in the portfolio. Mercer’s Sustainable Growth Framework guides investors on how to monitor and report on ESG integration and to include ESG risk in investment analysis/decision-making including environmental reporting such as portfolio carbon footprinting. Active engagement with companies failing to address ESG risks through voting and company engagement is part of the stewardship process, as is the assessment of allocation to sustainability themes and impact investments e.g. renewable energy, water or social housing.  Stewardship also includes exercising the choice to screen out sectors or companies such as controversial weapons and tobacco.

ESG ratings

Since 2008 Mercer has researched and rated asset manager strategies on their ESG integration practices to allow funds to monitor and report on the portfolio. Mercer rates over 6,000 strategies across all key asset classes globally for ESG and introduced ESG ratings for passive equity in 2014. The ratings are on a scale ranging from  1-4 as set out below and are prepared by Mercer’s global Investment Manager Research team.

 

 

Climate change
For the last 8 years, Mercer’s Responsible Investment business has been recognised for its global thought leadership on the subject of climate change scenario analysis for investors. Within  Mercer’s Investment Framework for Sustainable Growth, climate change is considered a meta-theme which investors should consider in strategic asset allocation and at portfolio, asset class sector and company level and to align with the Global Financial Stability Board Climate Change Taskforce financial disclosure recommendations. Mercer’s Investing in a Time of Climate Change and Preparing Portfolios for Transformation help investors consider the potential impact of positioning an investment portfolio for a transition to a low carbon economy by shifting assets away from traditional approaches — which typically include exposure to fossil fuels and other carbon-intensive industries — and tilting toward sustainable alternatives. Mercer has developed a complete climate scenario analysis tool and report for investors which outlines how to address climate risks and opportunities.

Global Responsible Investment expertise and industry collaboration
Mercer has been leading Responsible Investment globally since 2004 and works with superannuation, pension and sovereign wealth funds, endowments and foundations, insurers, and wealth management. Mercer Responsible Investment was the consultant appointed to develop the United Nations Principles of Responsible Investment in 2008 and is a founding signatory. We are an active member of major industry collaborations among institutional investors such as the Investor Group on Climate Change and the Responsible Investment Association Australasia as well as a leader on market reform and advice to G20, World Bank International Finance Corporation and initiatives globally for building sustainable finance systems.  Within the MMC group Mercer Responsible Investment partners with colleagues, for example, the MMC Global Risk Centre and its work for the World Economic Forum. Our global RI team has a long history of innovative research and of developing new tools, investment advice, and investment solutions.

We look forward to partnering with you and sharing the Responsible Investment Roadmap and journey.

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We look forward to partnering with you and sharing the Responsible Investment Roadmap and journey.
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