ESG investing integrates the consideration of Environmental, Social and Governance ("ESG") factors into the assessment and selection of investments.
Example of ESG factors include:
• environmental (eg energy efficiency and emissions) issues;
• social concerns (eg labour conditions and workings standards, including training and qualifications, staff turnover);
• governance and corporate responsibility (eg remuneration, company board structure and operation); and
• more broadly, a company's role within a community and society.
How we can help
At LCP, as part of our investment research programme, we devote considerable time to ESG matters. This includes discussion on these topics - and their importance in the investment process - with a wide range of managers and other industry contacts.
We can help you:
• learn what ESG investing is all about / bring you up to speed with the latest developments;
• choose investment managers taking account of their ESG investment capabilities;
• monitor your investment managers' ESG activities; and
• ensure that your scheme documentation and communications properly reflect your stance on ESG.
Best practice
For UK institutional investors who want to engage fully with ESG matters, the most important ESG-related codes are:
• the United Nations Principles for Responsible Investment (the "UN PRI"); and
• the UK Stewardship Code (the "Stewardship Code").
The UN PRI
The UN PRI is a voluntary code that investors can use as the basis for actively considering ESG matters as part of the investment-decision making process. The initiative comprises six principles, each with a number of recommended actions. Further information can be found via www.unpri.org
The Stewardship Code
The Stewardship Code's aim is to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. It seeks to achieve this by enhancing the quality of engagement between institutional investors and companies, thus improving the link between corporate governance and the investment process. It contains seven guiding principles for institutional investors.
The Financial Reporting Council oversees the Code which operates on a "comply or explain" basis. We support the Stewardship Code and encourage our clients to comply with it, where relevant. Further information can be found via www.frc.org.uk
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