Seeking an optimal sustainable investment strategy

We specialize in creating leading sustainable investment strategies to help ensure your portfolio can navigate tomorrow’s climate challenges. Drawing on two decades of experience, our global team delivers research, advice, tools and solutions to help you manage your risk profile while seeking favorable returns along your journey.

By informing where you are compared to your peers, our RITE framework promotes our best practices and monitors your progress over time. Our Sustainable Investment Pathway advises on opportunities to integrate your ESG, DEI, and impact investing priorities. Our climate scenario modeling positions you to face the future with greater awareness. By analyzing your organization’s capacity for transitioning to a net-zero economy, our ACT tool can help you lay out a road map for sustainable investment.

A sustainable investment strategy is no longer a “nice to have”, but an imperative 

As governments establish sustainable investing policies and regulation and investors adopt Sustainable Development Goals and donors and beneficiaries demand that investors take real action to stop polluting, grow the economy sustainably and protect the vulnerable, we’re at a critical point for sustainable investment.

 

As well as incorporating these ESG considerations into portfolios, investors are turning their attention to diversity, equity and inclusion (DEI) within managers and strategies, striking a balance between doing the right thing and delivering on investment commitments – otherwise known as impact-investing.

Our Sustainable Investment Declaration outlines our approach and commitment to helping you make a positive sustainable impact while aiming to generate favorable returns.

Common questions investors are asking themselves: 

  • Where am I on my sustainability journey? 
  • Where are managers on their journey?
  • What practical changes can I make today?
  • How can I ensure diversity, equity and inclusion (DEI) of managers and strategies?
  • How do I strike an optimal balance between the greater good and meeting my objectives?

Four important considerations when defining your sustainable investment approach

There are many ways to approach ESG within a portfolio. The following are the main approaches, 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 budget to sustainability themes or impact investments for new opportunities
  • Stewardship: engage in voting and engagement 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 investors. 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 decarbonizing 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 rigorous analysis of the climate crisis. Our scenario modelling uncovers emerging opportunities, helping investors decide how they want to influence the climate crisis as well as how to make their portfolios resilient against future challenges.   

Our quantitative analysis, in line with Task Force on Climate-related Financial Disclosures (TCFD) reporting, 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 are integrated into Mercer’s capital market assumptions across all our services.

DEI considerations are essential to every sustainable investment strategy. Discrimination in all its forms is unacceptable and sustainable asset managers can galvanize capital towards businesses that truly promote the power of their people.

More investors are striving to find a balance between doing the right thing for the planet and helping to deliver on investment returns. We can help you identify managers revolutionizing their industries and simultaneously improving the world. We call this impact investing.

Tools to help you amplify your sustainable investment strategy

It is important to gain insight into how well you are currently integrating ESG considerations into your overall investment decision making.
Our RITE approach will evaluate your portfolio across each area of Mercer’s Sustainable Investing Pathway (Beliefs, Policy, Process and Portfolio) to score your portfolio on a scale from A++ to C and compare it to your peers. This tool can also monitor your improvement over time.

Climate Benchmark tool

Our Climate Benchmark tool assesses current practices to uncover activity gaps and any need for improvement in the field of advanced climate investing. The tool evaluates 10 categories of activity and assesses your current level of progress on a scale from 1 to 5; 1 indicates “not started” and 5 indicates “fully developed”.
This spider chart is an example of the output of the climate benchmark tool, which compares an investors current climate practices compared to that of their peers. The graph shows the investors progress on 10 categories, rating it from a 1 to 5.

Once you have a clear picture of where you are on your journey, you will need to review your goals against your organizational beliefs, policies, processes, and overall portfolio approach. This will help you forward and fill any gaps specific to your organization.

Mercer’s transition framework for emissions reduction

Our transition framework helps you establish your current emission baselines, while assessing how to make reductions, set target milestones, and develop an implementation plan that can be integrated within your strategy and portfolio.
This diagram shows the process and timeframe that an investor could adopt to help transition portfolios to zero emissions by 2050.

Sustainable Investment Pathway

This diagram is a picture of the four stages of the sustainable investment pathway - beliefs, policy, process and portfolio.
This diagram illustrates the sustainable investment pathway, from zero to thirty-six months.

After identifying areas for change, we help you understand the implications upcoming transitions will have on your portfolio. How will your asset allocation need to change over time? What are the impacts to your asset classes and managers? Our team of experience specialists across the globe can help you answer these questions, drawing from our detailed knowledge across asset classes, managers, and strategies. 

When reviewing your portfolio and action plan, we help you understand the capacity of your managers and organizations to transition to a sustainable strategy. Our tool Analytics for Climate Transition calculates the current emissions baseline, identifies areas for possible reduction, and recommends a transition plan by asset class.

Our commitments to help make a difference

Our commitment to net-zero by 2050

Sustainability is at the center of our investment approach and our firm as a whole. We have committed to a target of net-zero absolute carbon emissions by 2050 across the majority of our funds. We expect to reduce absolute portfolio carbon emissions by 45% from 2019 baseline levels by 2030. Here, Mark McNulty, our International Head of Clients, explains more. 

We have identified clear goals and accountability

  • We expect to reduce absolute emissions by 45% from 2019 baseline levels by 2030
  • We have committed to hit net zero absolute carbon emissions by 2050 for our UK, European and Asian clients with discretionary portfolios and most of our multi-asset funds domiciled in Ireland
  • We will produce annual progress reports on absolute emissions and carbon intensity reports

Sustainable investment solutions for institutional investors

We can work with you to build and execute your sustainable investment strategy, helping you meet your overall sustainability objectives. As one of the largest global investment consultants and outsourced CIO providers, we have access to a universe of managers, asset classes, and opportunities. We can analyze your portfolio through multiple lenses, ensuring every investment decision you make considers the most pressing global themes like climate change.

  • Responsible Investment Total Evaluation (RITE)

    This tool provides an evaluation across your beliefs, policies, processes, and portfolio. Show you how you are doing on an A++ to C scale, it also compares to your peers and can monitor your improvement over time.

  • Sustainable investment pathway

    This advice and implementation framework provides you with the foundation for strong governance and portfolio implementation, helping you take action on your sustainability journey. 

  • Analytics for Climate Transition framework (ACT)

    Our ACT framework helps investors position their portfolios to take advantage of the shift to a carbon-free future. ACT assesses a vast range of data to rank the transition capacity of listed companies. 

  • Investing for impact

    We can help you build a strategy to reach an optimal balance between making a difference and reaching your investment goals. 

  • Integrating DEI

    By using our resources and experience, we can help you define diversity, source what we believe to be the best ideas, and put a plan in place to help you get there. 

  • Strategic and manager research

    MercerInsight®, an alliance with eVestment and MercerInsight® Community provide you with strategic and manager research to guide your investment decisions.

It's all here: MercerInsight® Community

Simplify your search. Get strategic research tailored to your interests from thought leaders across the investment industry, including Mercer and hundreds of third‑party publishers. Membership is complimentary, and it takes seconds to sign up.
Join the community

Leverage our breadth and depth

With over 20 years of experience in helping clients invest sustainably, we can help you identify the right investment opportunities for balancing returns with positive change. We launched our proprietary ESG ratings platform for sustainable investments in 2008, covering over 4,000 strategies. Since then we have built a suite of frameworks and tools to help you identify optimum sustainable investments and enhance your sustainable portfolio construction.

Related insights

    Wherever you are on your sustainable investment journey, we can help.