A  growing focus for investors is the area of Responsible Investing and the consideration of ESG (Environmental, Social & Governance) factors in their investments. For asset managers within investment decision making there is a clear recognition of the importance of ESG factors in terms of delivering sustainable longer term returns, particularly around key macro themes such as climate change which will impact on all assets into the future.

In 2010 at Irish Life we were one of the first Irish signatories to the UN supported Principles for Responsible Investing (UNPRI). The PRI defines Responsible Investment as “an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance factors, and of the long-term health and stability of the market as a whole”.

Since then we have been actively using our shareholding responsibly, advocating and encouraging better standards from the companies in which we invest and over the last few years have been embedding responsible investment practices across our business and across all of our investment teams. 

By the beginning of 2020 we will have over €15bn in assets under management invested with consideration of ESG criteria and are targeting a 30% reduction in the carbon intensity of our flagship investment portfolios, MAPS. Our approach is to materially improve the sustainability characteristics of our investment strategies while maintaining the same risk/return profiles. We have underpinned this approach with rigorous analysis, including over 2 years of proprietary research. In addition, we will also be providing a range of options for clients who wish to move to responsible investment strategies. 

While responsible investing is considered laudable it is also sometimes viewed as coming at the expense of returns for investors. We don’t think this is the case and believe that we can adopt ESG metrics and yet still maintain investment returns. For us it’s a strategic issue so much so that it is a core pillar of our business strategy. ESG is a set of criteria used by investors to assess the sustainability of an investment and is increasingly playing a greater part in decisions around where capital should be invested, such as in companies that can prove they have sustainable business practices including climate-friendly practices or stronger governance practices.

Ignoring any moral responsibility towards the environment, from an investment perspective, climate change and its potential impact on all assets is a significant macro theme impacting financial markets. Investors need to consider how they incorporate this risk into their investment decision making and manage their exposure to climate related risks into the future. We are now enhancing our approach across our active capabilities to further integrate ESG factors into our decision making. Incorporating Responsible Investing factors offers a complementary measure of long term risk not captured by traditional financial metrics.

Our ESG approach

We operate a holistic 3 pillar approach which covers exclusion, integration and active ownership all of which consider climate change as a key factor. 

Exclusion: We will be excluding some companies from our funds where their conduct breaches well established globally accepted standards or where their business model centres around activities which investors feel are not consistent with a sustainable economy in the future. 

Integration: We will include ESG factors into our investment decision making, considering them alongside other traditional factors from a risk management perspective.

Active Ownership: We use our shareholding power to influence corporate behaviour to more sustainable business practices through voting and direct engagement and dialogue.

We have also recently signed up to Climate Action 100+ a global investor initiative targeting the world’s largest corporate greenhouse emitters to take meaningful action on climate change. Ireland like any other economy needs to transform to a more sustainable way of operating – our position gives us the responsibility to drive this change in our sector.

Building long-term financial security for our clients 

We strongly believe we have a responsibility to create long term sustainable returns for our clients and that incorporating environmental, social and governance (ESG) factors can have an impact on the performance of our clients’ investments, and that the management of ESG risks and exploitation of ESG opportunities, particularly for a portfolio-wide issue like climate change, can add value to a portfolio. 

We underpin our approach with the same rigour and analysis as any other investment process and our aim is to materially improve the sustainable characteristics of our investment strategies while maintaining the risk/ return profiles. This leaves the fundamental nature of the investment approach unaltered and enables us to adapt our approach over time as the market and our research dictates. 

Our clients trust us with their investments and to deliver on our core promise to them – to deliver better futures, that is our priority and we believe we can do this and at the same time factor in the responsible impact of our investment decisions.

Warning: If you invest in this fund you may lose some or all of the money you invest.

Warning: The value of your investment may go down as well as up.

Warning: This fund may be affected by changes in currency exchange rates.

Irish Life Assurance plc is regulated by the Central Bank of Ireland.

Irish Life Investment Managers Limited is regulated by the Central Bank of Ireland.