Long-term thinking for superannuation funds
Many large superannuation funds have become increasingly interested in how long-term value is affected by environmental, social and governance (ESG) factors. Legal requirements as well as member and sponsor interest are driving this agenda.
Climate change, which may destroy 5-20% of GDP and the widespread losses caused by the credit crunch have highlighted to many pension funds how failures in foresight or governance and social or environmental problems can damage value, both long and short term. The difficulty funds face is in identifying what steps make sense when to guard against value destruction that may occur years away and very unpredictably. Seeking better disclosure of ESG impacts; asking fund managers to integrate ESG issues within investment management; and promoting engagement to improve corporate performance are each key to mitigating risk and protecting long-term value.
A growing number of asset owners are recognising the benefits of ESG integration – investors with over USD 18 trillion under management have signed up to the UN Principles for Responsible Investment which promote this agenda.
The way ahead
CAER can help you to:
- • Assess their portfolio
- • Press companies to disclose more
- • Develop their own engagement or voting approaches
- • Develop ways to assess the integration of ESG issues by their fund managers
- • Respond to their member’s concerns
CAER is an international partner of EIRIS, who have created toolkits focusing on climate change and on the PRI to provide first steps that superannuation funds can take in these areas. CAER and EIRIS develop specific asset owner services to help trustees review portfolios. The research is based on a wide range of sources and dialogue with companies through a global team of experienced analysts. CAER can create gradings and criteria that make sense of ESG data with a transparent methodology that lets clients make the decisions. The ESG offering provides around 150 criteria on over 3,000 companies across Europe, North America and the Asia Pacific region. Over many years CAER and EIRIS have worked with a variety of pension and superannuation funds (and their managers) to tackle ESG issues. Some have sought an analysis of their portfolios on particular issues. Others have wanted to give guidance to, or monitor their fund managers. CAER expects that an increasing number of superannuation funds will be looking for specific support for the approaches they want to develop to enhance long-term shareholder value in this space. CAER sees its role as a service provider of ESG data and services to these funds.