Building a robust sustainable investment strategy

We build or optimize our clients’ sustainable investment strategy to help them meet their investment objectives. Our research, tools, advice and solutions are designed to help mitigate risks to portfolios while seeking to capture investment opportunities associated with sustainability. We assess portfolios’ capacity to transition to a low-carbon economy and can incorporate climate and impact considerations, environment, social, and governance factors.
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How a sustainable investment strategy can be beneficial

Investing sustainably – for the future – goes beyond just incorporating environmental, social and governance factors. It also involves striking a balance between wider priorities and delivering on investment commitments, otherwise known as impact investing.

Questions to ask when defining your approach: 

  • Where am I on my sustainability journey?
  • Where are asset managers on their journey?
  • What practical changes can I make today?
  • How do I strike an optimal balance between the sustainabililty and meeting my financial objectives?

Considerations when building your sustainable investment strategy

Extreme weather events are a pressing issue for the planet and for the investment community. Institutional investors, such as pension funds, financial institutions, insurers, wealth managers, endowments and foundations, hold trillions of dollars in assets in their portfolios. In a decarbonizing economy, these assets are highly exposed to climate transition risks.

Climate change scenario modelling

Our global partnership with Ortec Finance has enabled us to provide all types of institutional investors with a rigorous analysis of the climate crisis. Our scenario modeling uncovers emerging opportunities, helping investors decide how they want to influence the climate crisis and how to make their portfolios resilient against future challenges. 

Our quantitative analysis, in line with the Task Force on Climate-related Financial Disclosures (TCFD), is grounded in economics and science. This analysis provides a deep level of granularity, allowing clients to consider whether climate impacts are fully priced into every asset class and economic sector before reallocation decisions are made. The long-term projections it provides are integrated into Mercer’s capital markets assumptions across all our services.

There are a number of approaches to sustainable investment, including environment, social, governance factors and screening, thematic investing and impact investing. Some investors are looking at impact investing to help them strike a balance between what they consider is doing the right thing for the planet, while pursuing financial returns. There are a number of considerations for impact investing.

Considerations for impact investing

  1. Defining your ambition and project themes
  2. Identifying opportunities to strike a balance
  3. Sourcing and accessing managers
  4. Reporting on progress and impact

Our team of experienced specialists can help you review your objectives against your investment goals, defining an optimal strategy that balances your sustainable investment ambitions with returns.

Tools to help you implement your sustainable investment strategy

It can be insightful to assess how well you are currently integrating environment, social, governance factors into your overall investment decision making.

Responsible Investment Total Evaluation (RITE) approach

Our RITE approach will evaluate your portfolio across each area of Mercer’s Sustainable Investing Pathway (Beliefs, Policy, Process and Portfolio) to score your portfolio on a scale from A++ to C and compare it to your peers. This tool can also monitor your improvement over time.

Climate Benchmark tool

Our Climate Benchmark tool assesses current practices to uncover activity gaps and any need for improvement in the field of advanced climate investing. The tool evaluates 10 categories of activity and assesses your current level of progress on a scale from 1 to 5; 1 indicates “not started” and 5 indicates “fully developed”.
This spider chart is an example of the output of the climate benchmark tool, which compares an investors current climate practices compared to that of their peers. The graph shows the investors progress on 10 categories, rating it from a 1 to 5.

Once you have a clear picture of where you are on your journey, you will need to review your goals against your organizational beliefs, policies, processes and overall portfolio approach. This will help you move forward and fill any gaps specific to your organization.

Transition framework for emissions reduction

Our transition framework will help you establish your current emission baselines while assessing how to make reductions, set target milestones, and develop an implementation plan that can be integrated within your strategy and portfolio.

Sustainable Investment Pathway

This diagram is a picture of the four stages of the sustainable investment pathway - beliefs, policy, process and portfolio.

After identifying areas for change, we can help you understand the implications that upcoming transitions may have on your portfolio. How will your asset allocation need to change over time? What will be the impacts on your asset classes and managers? We can help you answer these questions, drawing on our deep knowledge across asset classes, managers and strategies.

Based upon your priorities, when reviewing your portfolio and action plan, we will help you understand the capacity of your managers and organizations to transition to a sustainable strategy. Our Analytics for Climate Transition tool calculates your current emissions baseline, identifies areas for possible reduction and recommends a transition plan by asset class.

Incorporating net-zero into client investment solutions

At Mercer, we expect to reduce portfolio carbon emissions by 45% from 2019 baseline levels, with our clients for their investment portfolios. By 2050, we target net-zero carbon emissions for our UK, European, Australian, New Zealand and Asian clients with discretionary portfolios and for most of our multi-asset funds domiciled in Ireland.  

We will produce annual progress reports for our clients on emissions, alongside carbon intensity reports. 

Sustainable investment solutions for institutional investors

We can work with you to build and execute your sustainable investment strategy, helping you meet your overall sustainability objectives. As a trusted consultant and OCIO provider we have access to a universe of managers, asset classes and opportunities. We can evaluate your portfolio through multiple lenses, ensuring every investment decision is aligned with your values, and policies.

  • Responsible Investment Total Evaluation (RITE)

    This tool provides an evaluation across your beliefs, policies, processes and portfolio. It shows you how you’re doing on a scale from A++ to C and compares you to your peers. It can also monitor your improvement over time.

  • Sustainable investing

    We build or optimize our clients’ sustainable investment strategy to help them meet their investment objectives. Our research, tools, advice and solutions are designed to help mitigate risks to portfolios while seeking to capture investment opportunities associated with sustainability.

  • Analytics for Climate Transition (ACT)

    This framework assesses a vast range of data to rank the transition capacity of listed companies to help you position your portfolios for a carbon-free future.

  • Investing for impact

    We can help you build a robust impact investing strategy designed to accelerate real-change and whilst helping you pursue stronger returns for your portfolios.

  • Integrating inclusion

    We work with you to help you establish what your values are around inclusion, and build your investment strategy around them, aligning with your policies.

  • Investment research

    Access the latest strategic investment research on MercerInsight Community and our forward-looking asset manager research on MercerInsight to help guide your investment decisions.

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Leverage our breadth and depth

We have more than 20 years of experience helping clients invest sustainably and finding investment opportunities to balance good returns with positive change. We launched our proprietary sustainability ratings platform for sustainable investments in 2008, covering over 4,000 strategies. We have built a suite of frameworks and tools to help you identify optimum sustainable investments and enhance your sustainable portfolio construction.

Awards

Investment consultant of the year 2024

Mercer has been recognized as the investment consultant of the year by Environmental Finance for pioneering sustainable investment and assisting more than 25 institutional investors around the globe to better assess their exposures to climate transition risks. 

Related insights

    Wherever you are on your sustainable investment journey, we can help.

    Speak with one of our team today