Responsible investment

We own millions of shares in companies on behalf of our members. So it’s our responsibility to help make these companies sustainable and profitable in the long term. One way we do this is by exercising our voting rights.

Most shares give their owners a right to vote on some company decisions, including things such as whether to take over another company or approve the amount senior executives are paid. Voting usually takes place at each company’s AGM.

Our fund managers exercise these voting rights with regards to the shares Nest owns on behalf of our members. They vote in line with their respective voting policies, but we also have a voting and engagement policy of our own.

This sets out Nest’s viewpoint on important areas and tells our fund managers how we expect companies to consider key issues.

Each year we publish our voting summary report setting out how all our fund managers have voted and how this compares to Nest’s voting policy.

We also report the votes our fund managers make every quarter. 

You can see how we voted here.

Working together with fund managers, key stakeholders, partners and organisations allows us to be more effective when acting on issues that matter to our members. It’s important that when we’re choosing fund managers we let them know what we expect in terms of managing ESG risks and opportunities.

This includes how they assess ESG factors and build that assessment into their investment process and their voting and engagement activities.

We expect our fund managers to demonstrate how managing risks and harnessing opportunities can improve the long-term performance of our investments.

We also award focused ESG mandates. These remove high-risk investments common in a certain asset class. For example, our emerging market equities fund doesn’t invest in companies with the largest ESG risks.

To achieve positive change across our investments, and the markets and regulatory environments in which we operate, we also unite with other organisations. This allows us to exert stronger influence and speak with one voice.

Find out who else we work with.

Nest has developed a risk management model to identify where companies we invest in have poor ESG performance and help them improve. The model scores companies on their ESG and financial performance.

The model has helped us identify and prioritise three key risks:

• How companies treat the environment - we’re addressing this through a focus on companies’ greenhouse gas emissions.
• How companies interact with others - we’re addressing this through a focus on conduct, culture, staff reward and progression.
• How companies lead and organise themselves - we’re addressing this through a focus on audit and dividends that contribute to public and investor confidence and trust.

Read more about our current areas of focus here.

As we continue to grow, and our investment function develops, we’re looking at more ways to incorporate ESG risk factors into our asset allocation decisions. The first step we’ve taken is to add a climate aware global equity fund to our portfolio as one of the core building blocks that make up our default strategy. 

We’ve also ensured that ESG was our top priority when we designed our segregated commodities fund, which resulted in several commodities being excluded from the fund’s universe. Energy providers with high climate risk exposure are excluded, as are companies focused on thermal coal, palm oil, uranium, and tobacco.