Paul Lee Head of Stewardship & Sustainable Investment Strategy
Find me on LinkedIn
Drop me an email
10-second summary
Much like car owners having to navigate the rapidly-expanding ULEZ (or Ultra Low Emission Zone), pension schemes are having to navigate the ever-evolving sustainable investment landscape. As long-term investors, pension schemes need to consider long-term risks; this includes ESG (or sustainability) factors. We help our clients manage their regulatory requirements, fiduciary obligations and broader sustainability goals – such as becoming net zero.
We aim to generate financial returns that are aligned with our clients’ investment objectives whilst also considering material ESG risks and opportunities.
How do we approach sustainable investment at Redington?
Investing without sustainability in mind exposes pension schemes to unnecessary risks. Climate change alone will have significant pervasive investment impacts across all asset classes globally within the coming years and decades.
Therefore, investors who position themselves wisely for the transition to a decarbonised economy will undoubtedly perform better than those who ignore the implications of that transition. In addition to the risks they present, such sustainability challenges also offer an opportunity for pension schemes to use their capital as a force for good. Many of our clients have chosen to pursue impact targets and align their portfolios with net zero.
Pitstop 2: Sustainable investment Balancing your investment and sustainability goals
Since the ultimate aim of a pension scheme is to pay member benefits as they fall due, we approach sustainable investment as investors first and sustainability experts second. We fully recognise our clients’ responsibilities as fiduciaries and will never promote sustainability issues in silo – they matter to the extent that they influence risk-adjusted returns.
We help schemes identify the sustainability issues relevant to them – such as carbon emissions. These issues are incorporated within our PRMF (introduced here), alongside key investment objectives and constraints, giving trustees regular oversight of their exposure to material ESG risks and progress against any sustainability targets. This helps to ensure that all strategic decisions consider associated investment and sustainability implications in tandem.
As well as advice and support on decision-making and regular reporting, we offer clients specific tools and vehicles to deliver on their sustainability objectives. These range from climate and impact funds in areas such as renewables and social housing (where we’ve identified 'Preferred' managers whom we have confidence will deliver sector-leading returns – on a risk-adjusted basis – at specially negotiated fee rates), to our new stewardship offering where we hold managers to account for delivering high-quality stewardship and voting actions. Our framework of invest/engage/divest helps shape client thinking and enables them to take the necessary steps to deliver better member outcomes.
Complying with sustainability regulations – such as the Task Force on Climate-related Financial Disclosures (TCFD) – is sufficient for many schemes. But we recognise that some clients wish to go a step further, using their assets to tackle some of today’s most prevalent sustainability challenges. So, through our net-zero commitment and our seven-point climate action plan (right), we’ve built the infrastructure and capabilities required to help our clients make a meaningful impact.
How does this benefit our clients?
Whether the aim is to comply with regulations or reduce carbon emissions by 50% or more, we help our clients plot their own route through sustainability issues by cutting through the jargon and confusion. As a result, they stay on course for their investment objectives while also responding to the real-world challenges that all long-term investors face.
Redington's overall approach to ESG is impressive. The reporting is market-leading, and in comparison to other advisors, Redington makes less noise in this space and instead focuses on delivering to a high standard for clients. The team is both knowledgeable and supportive, and it brings comfort knowing subject matter experts are on hand to join trustee meetings if necessary and to ensure conversation is meaningful.