ESG calculators launch to increase investor sustainability insight

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ESG calculators launch to increase investor sustainability insight

Pension provider Scottish Widows and platform 7IM have launched separate ESG calculators to give clients greater insight into their funds' sustainability performance.

Scottish Widows clients who save through a workplace pension will soon have access to an app showing the sustainable impact of their retirement fund investments.

The provider said its Find Your Impact (FYI) tool would show people their own personalised sustainability impact rating based on the companies and funds they are invested in.

It added members would also be able to voice their opinion on a wide range of investment topics, issues and proposals, including questions on specific companies and their practices through FYI. The app, developed by FNZ, is due to launch this month.

Workplace pension members will also be able to see how their investments are performing financially alongside seeing their pension's performance on a range of sustainability parameters, bringing financial and non-financial performance together in one place, Scottish Widows said. 

Earlier this year, Scottish Widows committed to halving the carbon footprint of its entire £170bn portfolio of investments by 2030. It said it aimed to be net zero by 2050.

Head of pension investments and responsible investments Maria Nazarova-Doyle said: "Find Your Impact will encourage workplace scheme members to engage more closely with their pension, by giving them greater transparency over where it is invested and let them see the impact these investments have on the planet and society, as well as showing their financial performance.

"By having this information at their fingertips, we hope it will encourage people to take an active interest in their pensions, how their savings are performing and where their money is invested.

"The tool also has a ‘have your say" feature which will be used to collect the views of our members about what they want and expect from the companies we invest their money in. This will be taken into consideration as we shape our broader responsible investment and stewardship strategy."

Data used by the tool to analyse each member's underlying holdings is sourced from widely used ESG data providers including S&P Trucost and MSCI.

Scottish Widows explained relevant data points "are then displayed to members and a traffic light system (red, amber, green) that shows them the ESG impact of their pensions in simple terms - such as the equivalent number of miles travelled by car or the number of household waste bins".

'Clearer investment  choices'

7IM, the platform and discretionary manager, has also introduced an ESG calculator. It said it would help advisers make clients' sustainable impact investment choices clearer.

The firm said its tool helped to create an interactive experience that showed the user the carbon reduction of the investment in real-life terms.

The launch comes as part of 7IM's broader sustainability strategy as it recently launched a range of responsible model portfolios. 

"We see our role not just in providing underlying investment solutions that can cater to this appetite, but in assisting in all aspects surrounding this topic and helping advisers communicate what good can and should look like when it comes to ESG," said 7IM managing director of intermediary Verona Kenny.

"We hope that by developing new tools such as our ESG Calculator, we can help advisers cut through some of the noise around ESG, and allow clients to better understand the real-world effect of choosing to invest in a more sustainable way."

The calculator showed the equivalent reduction in carbon between 7IM's responsible choice model portfolios and sustainable balance fund, compared to an investment in a global equity index. This would be demonstrated in real terms, such as the equivalent of return flight trips from London to Tokyo or tumble dryer cycles, 7IM said.

"For example, a £100,000 investment into 7IM's Responsible Choice Balanced model portfolio over a 12-month period, could be illustrated as a comparative carbon reduction equivalent to 29 car trips from London to Edinburgh or 2,463 kilos of avocado grown, ripened and transported."

Advisers will be able to share the tool directly with their clients. They also have the option to produce a report that can then be shared with them, according to 7IM.

Kenny added: "Consumer interest and appetite around ESG solutions has boomed in recent years, yet confusion around product types and areas such as impact versus return is still widespread. With this in mind, we have focused on developing something that would not just make this a more interactive process for financial advisers, but for their clients too." 

7IM has also formed two sustainability committees; the culture and sustainability committee; and the ESG investment committee.

The former is responsible for the oversight of the firm's ESG activities and ensuring its commitments are met, including its target to reduce CO2 emissions by 20% and become carbon neutral from 2021, according to the firm. 

The ESG investment committee takes ownership of the implementation of ESG factors into 7IM's investment process. This includes the integration of ESG data, and allows them to observe how carbon emissions are impacted by the tactical adjustments made to portfolios, 7IM said.