Climate change update

11 January 2012

On 15 February 2011 Mercer's Responsible Investment (RI) team launched Climate Change Scenarios - Implications for Strategic Asset Allocation, a free public report.

In the months following its release, Mercer held discussions with the investors partners involved in commissioning the research. The objectives of these discussions were to gain feedback on the partners' experience with the collaboration, and gain insight regarding any action that has, will or may take place as a result of the study's findings and recommendations. This report shares those findings.

The adoption of best practice standards of corporate governance by the companies in which they invest is an important issue for many of our clients. Further, Mercer has a duty to protect its clients’ pension schemes best interests, which includes monitoring and evaluating the investment practices of their investment managers.

To this end, we occasionally ask ad-hoc questions of the managers in our global database, for example focusing on a specific issue or event. The aim of these requests is to better understand how investment managers are acting on behalf of our clients on a range of investment-related issues, such as corporate governance and engagement with portfolio companies.

Our submission to BIS draws on one of these ad-hoc queries. Earlier this year we asked 160 investment managers for their views on the remuneration report of a large UK bank. Where they are relevant we have included the responses in the first section of our response. The latter section of the document sets out Mercer's response to BIS' specific questions.

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Stewardship: What it means for you

3 November 2011

Pension scheme trustees have a duty to act in the best long-term interests of their beneficiaries. There is a growing view among academics and investment professionals that environmental, social and corporate governance issues can affect the short- and long-term performance of institutional investment portfolios. Pension scheme trustees, in complying with their fiduciary (or equivalent) responsibilities, therefore, need to give appropriate and due consideration to these issues as a core part of their deliberations.

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Institutional Share Voting and Engagement

A report commissioned by the Australian Institute of Company Directors, researched and authored by Helga Birgden and Dr Richard Fuller from Mercer's Responsible Investment team

13 October 2011

The Australian Institute of Company Directors (AICD) commissioned Mercer to provide a study to map the institutional share voting process from end-to-end. This national study is a first of its kind and has few parallels, even on a global basis. Participants in the study included company directors of ASX 200 companies including top 20 companies, fund managers, super funds and investor relations, and conducted in-depth interviews with about 50 share voting industry participants such as company directors, proxy advisers, superannuation funds, fund managers, custodians and industry associations. Further, industry experts were also consulted - totalling over 60 industry players.   

Some key findings from the report include:

• Institutional share owners are more activist, more willing to vote ‘against’ than 10 years ago.
  

   

• Australian superannuation funds are doing more of their own voting and are less likely to defer to their fund managers. Companies now need to find ways to speak directly to super funds, not just to fund managers.
  

   

• Almost everyone agrees that proxy advisers are influential. Proxy firms are here to stay – and what they do (in terms of research and voting recommendations) is too expensive for most institutional share owners to do themselves.
  

   

• However, a significant minority of directors believe there is an improper degree of influence – that institutional share owners have improperly outsourced decision-making to proxy advisory firms.
  

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June 2011

This year saw the first jointly sponsored report by the European Institutional Investors Group on Climate Change (IIGCC), the North American Investor Network on Climate Risk (INCR) and Australia/New Zealand Investor Group on Climate Change (IGCC), collectively “the investor groups”. The report provides an overview of the investment practices of investors around the world relating to their actions on climate change, in addition to presenting case studies of best practice. Mercer was commissioned to develop the survey underlying the report, as well as verifying and analyzing the responses from the 90 participating signatories, and authoring the report.

The report analyses how investors are building their knowledge of climate change and its implications for their investments and considers how they are taking account of climate change in their investment decision-making and engagement activities with regard to their assets. It also considers how investors are individually and collaboratively encouraging policymakers to provide a policy framework that is supportive of long-term investment decision-making and the move to a low carbon economy.

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Carbon Counts: Assessing the Carbon Exposure of Canadian Institutional Investment portfolios

A report commissioned by WWF-Canada

January 2011

Mercer and WWF-Canada released a ground-breaking report highlighting climate change as a new risk for institutional investors, and providing insights in carbon risk assessment of an investment portfolio. The report Carbon Counts: Assessing the Carbon Exposure of Canadian Institutional Investment Portfolios was prepared for WWF-Canada by Mercer and Trucost to identify the carbon exposure of Canadian institutional pooled investment products.

View press release (English)

View press release (Francais)

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