What are the leading pension funds doing?

The conversation has in the past few years moved from the activity of ESG integration to a focus on the actual real-world results of that ESG integration. The reasons behind this shift include the increasingly obvious evidence of pressing socio-environmental issues, combined with their anticipated systemic impact on economies, business and investment. 

As investors are increasingly deliberate about the intended results and outcome of their ESG integration, many investors have over the past few years adopted outcome and impact oriented frameworks such as the Sustainable Development Goals (SDGs) as a lens through which real world impact can be measured.  In support of this process, PRI has developed a high-level framework for any investors looking to shape real-world outcomes in line with the SDGs. 

An increased focus on outcomes based active ownership and stewardship is further exemplified in PRI’s vision “Active Ownership 2.0”, an evolved standard in stewardship that is underpinned by an increase in investors’ ambition and assertiveness. It builds on existing practice and expertise but explicitly prioritises critical systemic goals and collective effort aimed at concrete outcomes, rather than processes and activities or too narrow interests. The three central elements to an Active Ownership 2.0 approach are: 

  • Outcomes, not inputs or processes
  • Common goals
  • Collaborative action

“For years, investors have been growing their understanding of how environmental, social and governance issues in the real world affect their portfolios. Now understanding is also growing of how investors’ actions also have outcomes in the real world – along with expectations of what investors should be doing about those outcomes.”

“Climate change has moved from being something conceptual that people are concerned about to something visceral that they are angry about. The COVID-19 pandemic has brought simmering issues with how companies treat their workers to the boil, almost overnight. Underlying unease over employment structures in the gig economy have become pressing concerns.

Driving a taxi or bus, providing people’s food and caring for the elderly have become jobs for which simply going to work means putting your health on the line. Workers that would be categorised as “low-skilled” in February were labelled “essential” by March. This is a key time for investors to begin building their understanding of positive and negative outcomes – and to learn how they can shape those outcomes through their investment decisions, from their stewardship of investees and from their engagement with wider stakeholders such as policy makers.”

Shelagh Whitley, Director of ESG and SDGs, PRI and Marcel Jeucken, Managing Director, SustFin Ltd

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