Immanuel Atanasiu
Institutional investors are increasingly acknowledging the importance of environmental, social and governance (ESG) factors in evaluating risks and opportunities.
From climate risk concerns to labour practices and the evolving regulatory landscape, it has become increasingly important for trustees to incorporate socially-responsible investment models into their retirement savings strategies.
Hence, access to relevant, consistent and reliable ESG information has become a prerequisite for making well-informed investment decisions.
Namibia’s biggest institutional investor, the Government Institutions Pension Fund (GIPF), hosted a Responsible Investment Symposium (RIS) on 11 and 12 April 2024 to deliberate on the relevance and practical impacts of responsible investment and the ESG landscape globally.
Accordingly, retirement savings that incorporate ESG principles have become an appealing option for those seeking to secure their financial future, while also making a positive impact.
Trustees are being given more responsibility to ensure their asset managers adhere to ESG requirements, as the emphasis on sustainable and ethical investing develops.
The following considerations can considerably assist trustees in integrating ESG principles into their retirement saving strategies:
Environmental aspect
Climate change stands at the forefront of environmental concerns. Trustees ought to assess if asset managers include climate risks in their investment choices, and whether they have extensive policies regarding climate change.
It is also critical to emphasise the consequences for biodiversity and resource efficiency.
Asset managers ought to give preference to companies that conserve natural environments, and use resources efficiently.
Social factors
Human rights and equitable labour laws are two crucial socioeconomic factors.
Trustees need to confirm that asset managers take these into account when assessing investments.
This entails ensuring anti-discrimination legislation, secure working environments and equitable compensation exist.
Initiatives pertaining to diversity and inclusion, as well as community involvement, must be examined.
Furthermore, asset managers should invest in companies that foster diverse and inclusive workplace environments, and positively impact the communities in which they operate.
Significance of governance
ESG assessments require adherence to corporate governance practices.
Trustees should examine how portfolio businesses’ governance systems are evaluated by asset managers, encouraging robust, independent boards and transparent reporting.
Executive remuneration is another crucial issue that must be considered in relation to long-term performance and ESG goals.
In addition, it is critical to protect shareholder rights by actively holding shares, and voting with proxies in favour of ESG guidelines.
Integration and reporting
It is imperative that ESG factors are systematically incorporated into investment procedures.
Trustees must look at the processes and tools that asset managers employ to conduct ESG evaluations.
It is equally crucial to be transparent about ESG reporting, and how these issues affect investing choices and results.
To ensure asset managers actively engage with businesses on ESG concerns and take part in cooperative projects, engagement and stewardship procedures should also be assessed.
Conformity with trustee goals
Ultimately, it is crucial to confirm that the fund’s own ESG policy and objectives are in line with the asset manager’s ESG approach.
Trustees ought to look for asset managers that can adapt their asset allocation to achieve particular ESG objectives.
The final essential factor is a dedication to long-term value creation that strikes a balance between financial gains and positive societal impact.
Overall, trustees can effectively execute their fiduciary duties and promote sustainable and responsible investment by underscoring the significance of ESG factors.
These considerations ensure companies make sound financial decisions while promoting long-term environmental stewardship, social equity and ethical governance.
By incorporating ESG aspects, trustees can mitigate risks, identify growth opportunities and contribute to a more sustainable future.
*Immanuel Atanasiu serves as a trustee at Universities Retirement Fund. This article is written in his personal capacity.