Corporate social responsibility | Insight Investment

Climate change requires our attention as we seek to navigate the issues to fulfil our fiduciary obligation to our clients. It is unique in terms of its complexity, uncertainty and scope for material value creation and destruction. To protect our clients' interests, we need to consider how climate change could impact their investments, and to ensure portfolios remain resilient. However, stating the exact quantum and timings of the potential impacts with any accuracy remains a huge challenge.

• We support climate-focused groups that help to ameliorate risks from issuers, including inadequate disclosure.
• We participate in industry groups as part of our work managing systemic climate risks, such as the Institutional Investors Group on Climate Change (IIGCC) and Climate Action 100+.
• We developed our first climate risk ratings in 2017 as a comprehensive ranking of fixed income corporate bond issuers that enabled better engagement activity with companies. In 2020, to improve understanding of the key risks that climate change poses and further develop our offering in sustainable strategies, we expanded the scope of the ratings to create two scores for each company; one for its transitional risks and one for its physical risks.
• Our proprietary Prime climate risk ratings are generated for c. 16,800 corporate issuers as at 31 December 2023, and include data for 15 climate-related issues. For more information click here. 
• We became a signatory to the Net Zero Asset Managers Initiative in early 2021. By asset class, Insight’s target includes 100% of UK government bonds, and 75% of corporate bond and equity holdings managed in the UK. Please visit Insight’s net zero pledge page for more details of our initial commitment.
• Assessing financial materiality relating to climate change is necessary for corporate issuers. We undertake analysis in order to better understand and assess the plans that companies issuing our investments have in place to mitigate pecuniary climate risk factors where the issues involved could be or are financially material. Specifically, companies whose revenues are linked to thermal coal may have elevated levels of risk due to their vulnerability in a transitioning world. We therefore have a science-based position on thermal coal investments which commits to ensuring any holdings related to thermal coal usage will have a clear and actionable plan to exit coal by 2030 for developed market holdings and 2040 for emerging market holdings, while balancing the imperatives of a Just Transition as stated in the Paris Agreement. This is in line with the scientific evidence requirements set by the Intergovernmental Panel on Climate Change (IPCC) to limit global warming to 1.5ºC. Insight will look to achieve this, where possible, through effective engagement as we feel this is likely to achieve a better real-world outcome. However, the position developed also has an escalation function which may ultimately lead to divestment if coal exit strategies are not sufficiently aspirational. Insight’s thermal coal position is available here.
• Insight has also endorsed the United Nations Principles for Responsible Banking, a set of six principles established by the United Nations Environment Programme Finance Initiative to align banking activities with the Sustainable Development Goals and the Paris Climate Agreement, and become a supporter of the Transition Pathway Initiative(TPI), a global initiative led by asset owners and supported by asset managers which aims to help investors align with the goals of the Paris Agreement.
• Many ESG issues require a collective response from the investment community. We work on behalf of our clients to identify topics reflecting their priorities, and work with them, other investors, governments, companies and civil society organisations. Our activity may focus on building understanding, sharing expertise and/or engaging alongside and with other stakeholders on these issues. By doing so we believe we can raise standards and promote best practice, to protect our clients’ interests more effectively Click here for more information about Insight’s memberships and collaborative initiatives.

• In 2024 Insight reaffirmed its support of the Ten Principles of the United Nations Global Compact in the areas of human rights, labour, environment and anti-corruption. More information is available below under Environmental Initiatives.

Impact bonds (also known as ‘use of proceeds’ bonds) have matured to an undeniably viable addition to portfolios. In large parts of the impact bond market there are lower levels of disclosure, which is a significant enabler of ‘greenwashing’.

• To manage sustainability objectives for our clients, Insight analyses impact bonds using a proprietary framework.
• Insight has engaged in wider initiatives to help combat greenwashing and develop global standards. Insight is a member investor supporting the ICMA Green Bond Principles and Social Bond Principles and served on the Advisory Council of the Green Bond Principles and Social Bond Principles Executive Committee in 2019. In 2020, we responded to an International Financial Reporting Standards (IFRS) consultation to establish an International Sustainability Standards Board, which we believe could prove to be a significant step in the direction of standardisation of sustainability metrics and reporting. In 2023 we published influential research highlighting the need for the industry to consider how to account for the carbon footprint of green bonds – a question which has implications for carbon footprinting across bond and equity portfolios.

• Insight has proactively engaged with the UK government on the options for defined benefit (DB) pension schemes, most recently in responding to a consultation in April 2024. Our view is that DB schemes are the ideal vehicle to ensure the best financial outcome for pension scheme members. We encouraged our industry peers to respond, pointing out that the consultation had significant long-term implications and provided an unprecedented opportunity for members, sponsors and the wider UK economy. We continue to engage with the government, peers and other stakeholders on the issues. More information on our DB reform campaign site here.

   

Insight helped to drive the national conversation on proposed reforms to the UK’s Retail Prices Index (RPI) – reforms which have significant detrimental implications for millions of pensioners.

• In November 2019 we published a detailed white paper and open letter urging pension schemes, insurers, advisers and asset managers to engage with policymakers about the future consultation.
• We launched a dedicated website to connect with a broader audience of stakeholders and collate news articles in a single resource.

Our CEO, Abdallah Nauphal, wrote to the Chancellor and the Chair of the UK Statistics Authority urging that the consultation deadline, then set for 22 April 2020, be extended given the unprecedented backdrop caused by the COVID-19 pandemic. The deadline was subsequently pushed back to 21 August 2020. Our CEO also met with Stephen Timms MP, Chair of the Work and Pensions Committee, to discuss the issue.

Insight has played a very active role in the interest-rate benchmark reform process, which will have implications for financial markets worldwide as well as for our clients. In 2018 we were invited to join the UK Sterling Risk-Free Reference Rates (RFR) Working Group as it was expanded to include a broader group of participants, including investment management firms. We will continue to be engaged in this topic until the full transition from LIBOR to a new risk free rate completes.

The introduction and implementation of central clearing for derivatives under EMIR has significant implications, particularly for pension schemes in the UK and Europe, which account for the majority of Insight’s AUM. In collaboration with European pension scheme stakeholders, Insight has actively engaged with policymakers and regulators over these issues. Central clearing has been introduced in the EU, where its implications are more limited overall. Our work today focuses on the UK, where central clearing would have broad implications for pension scheme portfolios.

Insight, in partnership with the University of Oxford, has established a research prize for greening finance.

The ‘Insight Investment – University of Oxford Prize for Greening Finance’ aims to encourage more academic research to be done on the effects of incorporating environmental considerations into investment solutions.

Nominating partner organisations, selected based on their expertise and networks, play a key role in ensuring that nominations are of a high calibre and reflect the international scope of the Prize. For more details click here.

In 2024, the outstanding research prize was awarded to Professor Rob Bauer, Professor of Finance (Chair of Institutional Investors) at Maastricht University and holder of the Elverding Chair on Sustainable Business, Culture and Corporate Regulation. The winner of the outstanding service prize was Emmanuel Faber, Chair of the International Sustainability Standards Board, and formerly the Chair and Chief Executive Officer of Danone.

In 2023, the winner of the outstanding research category was Professor Caroline Flammer, Professor of International and Public Affairs and of Climate at Columbia University. The winner of the outstanding service category was Mary Schapiro, Vice Chair of the Glasgow Financial Alliance for Net Zero, Chair of the Climate Data Steering Committee, and former Chair of the US Securities and Exchange Commission (SEC).

You can view Mary’s Lecture at the University of Oxford here.

Insight’s view is that, to support the goal of greening the global financial system, more academic research is needed across asset classes. The industry needs novel ideas with practical applications for the finance industry, such as exploring the development of new financial instruments and ways in which markets should evolve to protect the environment.

Since 2022 Insight has published a climate change report aligned to the recommendations from the Task Force on Climate-Related Disclosures (TCFD). The report includes information on how Insight views climate change and takes it into account, how these views are applied within clients’ investment strategies as well as initial scenario analysis looking at the potential impact of climate change on portfolios that Insight manages on behalf of clients. The report reflects extensive work internally on this key issue. It is prepared by the Responsible Investment team and overseen by Insight’s new Climate Change Resilience Committee, which reports into the Insight Responsibility Oversight Committee and the Insight Board.

In 2024 Insight reaffirmed its support of the Ten Principles of the United Nations Global Compact in the areas of human rights, labour, environment and anti-corruption. In our annual Communication on Progress, we described our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture and daily operations.