Nest sets out ESG credentials

Nest supported 60 shareholder resolutions backing climate change transparency and voted against management 291 times, the provider’s annual investment report shows.

In its annual report, which puts environmental and corporate governance issues at the heart of its proposition, Nest says it withdrew £27.2m from companies that are not making progress on adapting for a low-carbon future, arguing this poses a risk to members’ returns. It has reinvested the money in companies positioned to benefit from a global transition to a low carbon economy, including renewables companies PG&E and Iberdola and green technology companies Vestas Wind Systems and Siemens Gamesa Renewable Energy. The report covers voting patterns to the end of Q1 2017.

Nest voted independently on 18 votes, including against executive pay at Barclays and in response to poor progress on gender diversity at Glencore. It voted on 60 shareholder resolutions on environmental issues to encourage companies to disclose how they manage climate risks and are preparing for the global energy transition.

Nest research conducted in 2017 shows over a quarter of scheme members said they looked for a responsible investment approach as a sign of high quality when choosing their auto enrolment pension scheme and 11 per cent consider a responsible investment strategy a priority for their pension scheme, compared to just 1 per cent who said offering a range of fund choices was a priority.

Nest chief investment officer Mark Fawcett says: “We’re concerned about elements of corporate pay. Executive pay can’t be set in a vacuum. If pay is disproportionate, incentives are opaque or in some cases pay policies are being structured to get around the rules, these pose clear risks to long term investors like our members. We’ve also taken a strong stance on gender diversity. Gender diversity at board level is a proven factor in better corporate performance, so we should be worrying about male-dominated boards that might undermine returns for our members.

“While we’re closely scrutinising issues that pose a particular risk to our members’ pots, we’re encouraged by the step change improvement in how our fund managers are voting across the board on things like executive pay, gender diversity and climate change. This is good news for our members and millions of other UK investors as a rising tide will lift all boats. We want to see the industry continue to work together and push for higher standards so all pension savers can benefit from a more profitable, sustainable and environmentally sound capitalism.”