Nest has extended the number of third parties providers it uses to supply data on environmental, societal and governance (ESG) factors.
The UK’s largest master trust provider will now source data from RepRisk and Sustainalytics and integrate this within its investment strategy.
Both providers will offer Nest live databases of high quality and timely ESG data, allowing the pension scheme to identify risks that may be emerging and scree out certain assets.This data will also automatically monitor news so that anything affecting a company’s reputation is quickly brought to light and informs engagement and voting decisions.
The databases will be fully integrated into NEST’s investment decision process. This will allow the pension scheme to consider the investment risks and opportunities associated with ESG factors to provide a more holistic view of companies, alongside the more traditional investment risk factors.
Corporate Adviser’s recent report into ESG in DC pension provision, found that both RepRisk and Sustainalytics were widely used by asset managers to source ESG information.
Nest says that evidence shows companies with strong ESG performance are more likely to achieve good economic returns for shareholders over the long term.
Nest says these new databases will help it fulfil its responsibilities as signatories to the Financial Reporting Council (FRC) stewardship code by monitoring and challenging the fund managers it uses to act upon these issues.
Nest adds that these new databases are particularly important as it moves into new asset classes – commodities and private credit – which will require greater scrutiny.
It says these new tools will play a key role in aligning Nest’s investments with “sustainable capitalism” and procuring them is in the best interests of members.
Nest’s head of responsible investment Diandra Soobiah says: “Nest is growing and evolving fast. Soon we’ll be looking after more than £15bn and tens of thousands of shares on our members’ behalf. It’s important we’re constantly reviewing how we scrutinise the companies we invest in for new ways to keep our finger on the pulse.
“These new databases will present the latest available information about our investments, helping us make more informed decisions as to whether they meet our expectations.”
She adds that support ESG is a fundamental part of Nest’s remit. “Our members want us to invest responsibility and the evidence is clear – considering ESG helps make better investment decisions.”