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Mercer's Responsible Investment Service
In 2004, Mercer formally launched a global business unit focused on RI and ESG issues, after years of providing advice to clients on these topics. Headquartered in Toronto, this unit now employs sixteen dedicated professionals in five offices around the globe. We work directly with leading responsible investors to develop cutting edge strategies and implementation plans. As well, our consulting work is increasingly undertaken in conjunction with colleagues from our investment consulting business so that we can provide truly integrated solutions to Mercer clients. To date, we have provided RI advice to national pension plans, corporate plan sponsors, foundations, industry bodies, and other significant institutional investors from around the world. Our team works with investors to make better investment decisions within a fiduciary framework: to enhance expected returns while managing risk and cost.
What is Responsible Investment?
Responsible Investment (RI) describes an investment process that incorporates an active consideration of environmental, social and corporate governance (ESG) factors within investment decision making and ownership practices. It is driven by the growing recognition among investors that responsible corporate behaviour can have a positive influence on the financial performance of companies – particularly over the long term. Investors who are aware of all factors that could affect investment performance are better placed to manage risk and generate value.
The evolution of Responsible Investment
RI has evolved from its roots in ethical investment, to a much broader field, including: sustainable investment; responsible investment; and shareholder engagement and activism.
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"First generation" was about negative screening (for example, excluding tobacco companies from portfolios). This was called "socially responsible" or "ethical" investment.
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"Second generation" evolved to include elements of positive screening, whereby "good" companies within each sector were rewarded.
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"Third generation" responsible investment is based on the philosophy that ESG or extra-financial criteria (for example, human capital, environmental, social and corporate governance factors) can have a positive affect on long-term corporate performance. Responsible investors should consider these factors within their investment analysis and shareholder engagement activities.
Why are institutional and corporate investors taking action?
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 Environmental, social and corporate governance (ESG) factors can be financially material
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Where ESG factors were once considered outside the realm of conventional investment decision making, they are now accepted as having a potentially material impact on financial performance and should therefore be embedded within the investment process.
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RI policies are consistent with good governance
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Having a process in place that ensures financially material ESG factors are captured within the investment process goes hand in hand with good governance.
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Lengthening the investment horizon enhances long-term value
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Increasingly, investors are concerned about “short-termism” within investment research, decision making and performance monitoring. A balance between capturing and monitoring short-term gains while protecting or enhancing long-term value needs to be established.
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Active ownership protects and strengthens investments
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Efficient capital markets are supported by high-quality relationships between owners and the entities in which they invest. Investors are increasingly utilizing active ownership tools, such as proxy voting, corporate dialogue and collaborative engagement, to protect and enhance shareholder value.
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IMPORTANT NOTICES
Proprietary and confidential
This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity, without Mercer's permission.
Opinions – not guarantees
The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed. Past performance does not guarantee future results.
Not investment advice
This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances.
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Mercer is a leading global provider of investment consulting services, and offers customized guidance at every stag e of the investment decision, risk management and investment monitoring process. We have been dedicated to meeting the needs of clients for more than 30 years, and we work with the fiduciaries of pension funds, foundations, endowments and other investors in some 35 countries. We assist with every aspect of institutional investing (and retail portfolios in some geographies), from strategy, structure and implementation to ongoing portfolio management. We create value through our commitment to thought leadership; world-class, independent research; and top-notch consultants with local expertise.
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