Responsible Investment: What You Need to Know

When we talk about ShareAction, we often say we exist to build the movement for responsible investment… But what is responsible investment?

Responsible investment is part of our vision for the investment industry. We encourage investors to drive positive change in companies and their wider investments by focusing on the long-term impact they have on the environment and society. Below, we lay out the key facts about responsible investment and our work to drive it into the mainstream.

In a nutshell

Responsible investment is an investment strategy which integrates environmental, social, and governance (ESG) factors into investment analysis and decisions. It recognises that ESG factors can have an impact on the financial value of an investment and also that investments have an impact on the world around us.

A responsible approach to investment recognises that long-term prosperity requires a move away from short-term profit as the only definition of value.

Digging a little bit deeper

“ESG” is at the very core of any work on responsible investment. ESG factors could include risks such as those posed by climate change, poor labour standards, and board corruption scandals. However, they may also present opportunities, such as investing in low-carbon alternatives like renewable energy companies. ESG are umbrella categories for the factors we hope responsible investors are taking into account when investing on behalf of pension savers.

Our campaigns (find out more here) over the past decade have fallen into these categories, for example:

Environmental

  • Challenging the decision-makers who invest people’s retirement savings in fossil fuel companies that gamble with the health of our planet and face growing regulation on climate change
  • Making sure investment banks are funding companies that have a growth strategy that fits with the low-carbon economy we have been building since the Paris Agreement on Climate Change
  • Encouraging companies to set ambitious targets to decarbonise their operations in order to actively limit climate change and build the market demand for low-carbon solutions

Social

  • Working with the largest British employers to make sure they pay all their staff at least the real Living Wage so workers can live with dignity
  • Driving transparency on companies’ direct operations and supply chains so that their investors can improve conditions, such as promoting fair pay and gender equality, for workers

Governance

  • Making the case for a transparent, accountable, and sustainable investment system headed up by people and financial companies acting in savers’ best interests
  • Calling out companies at their annual general meetings (AGMs) who have remuneration policies that reward executives with excessive pay and bonuses
  • Shining a light on companies that are not doing enough to make sure their staff and executive are diverse and properly represent the communities they depend on to grow

Where does ShareAction fit in?

Since 2005, we’ve made our name ranking the UK’s largest pension funds and their asset managers on their responsible investment performance. We still run those rankings (find out more here) and have added more strings to our bow to change the status quo and specific practices in the corporate and investment industries.

Our rankings shape the conversations we have with institutional investors (i.e. pension funds, asset managers, insurance companies, investment banks, etc.) and give us the tools we need to make the case for improving policies and practices by pointing to best practice amongst their peers on ESG issues.

At the core of our engagement on responsible investment is the belief that responsible investors act in two key ways:

  1. Allocates capital (i.e. invests money) in a way that promotes sustainable returns from companies and other assets that have a positive environmental, social, and/or governance impact;
  2. Engages investee companies to improve their impact and takes the steps to ensure that engagement is more than just talk, e.g. by requesting important data, or supporting strategic shareholder resolutions at a company’s annual general meeting (AGM).

All this may sound far removed from our daily lives but the reality is that we all have a stake in how the investment system works through our pension savings (find out more here). Our futures depend on that system, and our present is shaped by it.

Together with people across the investment chain, we are working to make sure the investment industry is responsible and acts in the best interests of savers, workers, and the environment.

What we do

Why do we think investors should be talking about responsible investment with you?


Colette St-OngeResponsible investment: What you need to know