Building a robust sustainable investment strategy
Investing sustainably – for the future – goes beyond just incorporating environmental, social and governance considerations. It also involves paying attention to diversity, equity and inclusion (DEI) within managers and strategies, and striking a balance between doing the right thing and delivering on investment commitments, which is otherwise known as impact-investing.
Questions to ask when defining your approach:
- Where am I on my sustainability journey?
- Where are asset managers on their journey?
- What practical changes can I make today?
- How can I ensure that DEI is a priority for managers and in strategies?
- How do I strike an optimal balance between the greater good and meeting my financial objectives?
Considerations when building your sustainable investment strategy
There are many ways to approach ESG within a portfolio. The following are the main strategies, which can be implemented individually or in combination. We believe success requires a mixture of these elements:
- Integration: Include ESG factors in investment decisions.
- Investment: Allocate budgets to sustainability themes or impact investments for new opportunities.
- Stewardship: Take part in voting and engage with underlying companies and policy makers.
- Screening: Eliminate sectors and companies deemed irresponsible and not aligned with your values.
Climate change is a pressing issue for the planet and for the investment community. Institutional investors, such as pension funds, financial institutions, insurers, wealth managers, endowments and foundations, hold trillions of dollars in assets in their portfolios. In a decarbonising economy, these assets are highly exposed to climate transition risks.
Climate change scenario modelling
Our global partnership with Ortec Finance has enabled us to provide all types of institutional investors with a rigorous analysis of the climate crisis. Our scenario modelling uncovers emerging opportunities, helping investors decide how they want to influence the climate crisis and how to make their portfolios resilient against future challenges.
Our quantitative analysis, in line with the Task Force on Climate-related Financial Disclosures (TCFD), is grounded in economics and science. This analysis provides a deep level of granularity, allowing clients to consider whether climate impacts are fully priced into every asset class and economic sector before reallocation decisions are made. The long-term projections it provides are integrated into Mercer’s capital markets assumptions across all our services.
As part of a wider strategy to invest sustainably, integrating a DEI lens into your decision-making process allows you to align your portfolios with your organisational mission and values. It also positions you to achieve long-term sustainable returns and will help drive change that could ultimately benefit us all.
Three steps to integrate DEI into your investment portfolio
- Define what diversity means to you
- Build a process and a strategy
- Implement your plan
No matter where you are on your DEI investment journey, we can help you define what diversity means for your organisation and integrate it within your portfolio and investment decision-making process.
There are a number of approaches to sustainable investment, including ESG integration and screening, thematic investing and impact investing. More investors are looking to impact investing to help them strike a balance between doing the right thing for the planet, while pursing financial returns. There are a number of considerations for impact investing.
Considerations for impact investing
- Defining your ambition and project themes
- Identifying opportunities to strike a balance
- Sourcing and accessing managers
- Reporting on progress and impact
Our team of experienced specialists can help you review your objectives against your investment goals, defining an optimal strategy that balances your sustainable investment ambitions with returns.
Tools to help you amplify your sustainable investment strategy
Climate Benchmark tool
Transition framework for emissions reduction
Sustainable Investment Pathway
Our commitment to help make a difference
Responsible Investment Total Evaluation (RITE)This tool provides an evaluation across your beliefs, policies, processes and portfolio. It shows you how you’re doing on a scale from A++ to C and compares you to your peers. It can also monitor your improvement over time.
Sustainable investment pathwayThis advice and implementation framework provides you with the foundation for strong governance and portfolio implementation, helping you take action on your sustainable investment journey.
Analytics for Climate Transition (ACT)This framework assesses a vast range of data to rank the transition capacity of listed companies to help you position your portfolios for a carbon-free future.
Investing for impactWe can help you build a robust impact investing strategy designed to accelerate real-change and whilst helping you pursue stronger returns for your portfolios.
Integrating DEIWe can help you define and build a diversity, equity and inclusion (DEI) investment strategy that seeks to deliver positive change and stronger portfolio outcomes.
Introducing some of our team
Wherever you are on your sustainable investment journey, we can help.
This content on this website is provided for informational purposes only and should not be taken as advice or recommendation to buy or sell any specific investment product or services, including Mercer’s investment management services, or to enter into any portfolio management mandate with Mercer.
Any investment carries inherent risks and you should carefully consider your own investment objectives, financial situation, and needs before making any investment decision.
Past performance is not an indication of future performance.