Peer benchmarking a major pension scheme to deliver a more focussed, higher-impact RI strategy

We used our Responsible Investment (RI) assessment framework to benchmark a large DB pension scheme’s responsible investment practice against its peers across 20 areas, revealing where the scheme was exceeding expectations and where effort could be better directed. The result: a more focused, higher-impact RI strategy.

The objectives

The scheme wanted to take stock of its responsible investment practices. The scheme had been investing time and resource across a broad range of RI activities but wanted a clear view of how their efforts compared to peers and where they were going beyond regulatory expectations.

The trustees wanted answers to two key questions: 

1. Where did their RI practices sit relative to comparable schemes?
2. Were they directing their efforts towards the areas that were likely to contribute most to achieving their investment goals?

Our approach

We assessed the scheme and a peer group using our proprietary RI assessment framework. We evaluated responsible investment practices across 20 areas, grouped into five categories: ESG foundations, investments, engagement, climate change and broader sustainability. Each area is graded on a four-point scale from weak (not meeting regulatory expectations) through to leading (demonstrating best practice among asset owners). 

Key insights

The scheme achieved an overall rating of strong, with leading in its voting practices, and it being at least adequate in all other areas.

Unsurprisingly, we found some of the peer groups weren’t achieving an adequate score for physical climate risk. This is an area where we’re doing an increasing amount of work, helping clients develop robust physical climate risk management approaches as the data and tools available improve.

The outcome

The leading score for voting was highlighted as an outlier. Given voting has become relatively less important for the scheme as its equity allocation reduced over time, we worked with the trustees and in-house team to consider how resources dedicated to voting could be redeployed to areas which could be more additive to the scheme’s risk management – such as engagement with investment managers.

The trustees also received reassurance their practices were generally appropriate relative to the scheme’s peer group and regulatory expectations.

The value we added

By providing an objective, evidence-based assessment of the scheme’s RI practices – set against both peers and regulatory expectations – we helped the trustee board refocus their RI strategy.

The scheme is now better positioned to direct its resources where they can have the greatest impact on long-term investment outcomes.