Embedding sustainability considerations into investment decisions
Embedding sustainability into the investment decision-making process of a pension scheme is essential for effective risk management, innovation and return on investment. A4S’s ESG Toolkit for Pension Trustees contains a maturity map, guidance, case studies and third-party resources to help trustees navigate the key challenges and maximize opportunities when integrating the considerations into investment allocation decisions.
MATURITY MAP
The ESG Maturity Map can help you, as a pension trustee, benchmark your current integration of sustainability within your strategic and investment decision-making processes against current best practice. It also suggests practical steps that you can take to progress. Many trustees have also used this maturity map to:
- Achieve consensus across the board of trustees on where their priority actions should be around investment selection and risk management.
- Understand where they are, in relation to other schemes.
- Challenge and probe further into responses from their advisers and managers on sustainability-related activities.
Guides
These guides have been written for trustees and include insights from peers with suggested practical steps and ‘top tips’. They are designed to support trustees when conducting in-depth discussions on sustainability considerations with their service providers and internal colleagues. The resources complement more granular work done on the same topic by other organizations, which can be found in the external resources section below.
Embedding ESG into asset class portfolios
Case Studies
Our case studies capture the 'what', 'why' and 'how' to embed sustainability into the decision-making processes of a pension scheme, across particular challenges. Topics include: setting a net zero investment strategy, considering climate in the employer covenant process, and dedicating assets to sustainable outcomes. The practical steps taken and top tips suggested are often transferable to large and small pension schemes from different jurisdictions.
Rethinking Scenario Analysis
Climate scenario analysis is a way for organizations to consider the potential impacts of climate change on their business. It is an essential tool in helping organizations plan their strategy and business activities as they seek to minimize their risks and pursue their opportunities under different warming scenarios. These resources help trustees understand the current limitations with climate scenario modelling and the benefits of taking a narrative-focused scenario approach.
External Resources
This is not an exhaustive list, but we find that the resources below complement this section of the toolkit.
ESG Model Contract Language
Model ESG language and guidance, customizable for portfolio and legal teams in determining ESG objectives within broader investment agreements, including model mandates, reporting requirements and sample criteria.
Net Zero Investment Framework
A set of recommended actions, metrics and methodologies through which investors can maximize their contribution to achieving global net zero emissions by 2050 or sooner.
Transition Pathway Initiative Tool
Designed to support investors, the tool assesses companies' preparedness for the transition to a low carbon economy.
SDG-ESG Infrastructure Investment Framework
This framework is intended to assist asset owners in measuring impact of infrastructure assets and projects on the delivery of the Sustainable Development Goals (SDGs) and ESG.
Investing Principles for Pensions
A governance framework to help pension schemes navigate and respond to ESG risks and opportunities at each stage of the investment chain.
