Pension schemes must examine more than just environmental metrics when considering their ESG commitments, delegates at this year’s Pensions and Lifetime Savings Association (PLSA) Investment Conference were told.
Addressing attendees at the Edinburgh conference on Wednesday, Abbie Llewellyn-Waters, head of sustainable investment at Jupiter Asset Management, said asset owners should quiz investment managers on what they are doing in the “social” element of ESG.
“Pensions trustees need to think about social inequality,” she said. “The focus and fixation, to date, has been on climate, but in the context of fiduciary duty, I encourage you to think beyond that.”
Over recent years, investment managers have successfully incorporated the environmental and governance aspects of ESG into their investment processes but some have struggled to measure social impact, she said.
The social element of ESG, which includes gender equality, human rights, employee safety, and economic prosperity has not been adequately addressed by some fund groups, Llewellyn-Waters said.
The claims made by Jupiter’s ESG boss, follow a recent survey published by BNP Paribas CIB which revealed 51% of investors found social factors to be “the most difficult to analyse, and embed, in investment strategies.”
Even though addressing the environmental considerations, such as climate change, of the ESG criteria has received significantly more support than addressing social issues, the ‘S’ of ESG is not any less important than the ‘E’, Llewellyn-Waters added.
Fund groups, however, have grappled with measuring corporate behaviours on these issues as there are fewer numerical values for quant analysis, such as carbon tonnage and temperature change.
At the PLSA conference, David Grimaud, head of portfolio solutions at Symbiotics, urged all investors to examine portfolio constituents against the UN Sustainable Development Goals.
He added: “We were asked to match an investment to SDG 5, gender equality and empowering women and girls. This very much matched our investment principles.”
In the BNP Paribas research, Erick Decker, chief financial officer at AXA Medla said: “Everybody can say they integrate ESG, but the question is how it impacts their security selection and what their targets are. The focus on a specific theme and objective is necessary.”