Responsible investment: what it means to us
When we think about our members’ financial futures, we think long term. That means investing in a way that supports sustainable returns over time. As a Universal Owner with a large, diverse, global portfolio, delivering on our fiduciary duty for members means we need to actively and responsibly manage the assets we own — helping to ensure they remain resilient and can continue to deliver sustainable financial returns well into the future.
Our new report, Responsible investment: what it means to us, summarises why responsible investment is central to our approach. It brings together why we invest this way, how we do it, and what it looks like in practice, with recent examples from across the portfolio.
It sits alongside our annual Stewardship Report — which gives more information on our approach to engagement and voting — and our Task Force on Climate-related Financial Disclosures (TCFD) report — which sets out in detail how we manage climate-related risks.
Simon Pilcher, USSIM CEO, said: “We invest for the long term. That means thinking beyond immediate challenges to the bigger system-wide risks facing markets. As an asset owner, we have an important role to play in encouraging companies and governments to act over a similar time horizon.
“Issues like climate change, a collapse in biodiversity, and a loss of confidence in financial markets are material system-wide risks for investors. Addressing them is essential to building a resilient portfolio for our members.”
What are our priorities?
Our responsible investment approach is to engage with the assets we own, focusing on sustainability and long-term outcomes, encouraging good corporate governance, and considering financially material factors. For all investments, we consider how financially material environmental, social and governance (ESG) factors could impact the value of those assets over time. The report includes practical examples of this in action (see Our work in practice, from page 7).
Our long-term ambition is to be recognised in the UK and globally as a leading asset owner with respect to responsible investment in areas that are key priorities for USS. Using a combination of activity — including stewardship, advocacy, collaboration and integration — our work is focused on four overarching priorities:
- Climate: Climate change is a significant financial risk and a core focus of our work. Our analysis shows that a hotter world would be detrimental to financial returns on almost all investments over a long time horizon.
- Nature: The natural world is the backbone of our economy. 35-54% of assets held by financial institutions are highly or very highly reliant on nature.
- Governance: We are better informed as investors when we understand how a company is governed, meaning we’re better placed to hold them to account on areas such as approaches to environmental and social issues.
- People: Poor management of social issues directly impacts people and communities and carries financial, regulatory and reputational risk for companies.
Pages 5-10 of the report explore how we apply these priorities day-to-day across the portfolio and through our ongoing work.
In focus: the transition to a low-carbon economy
The report also sets out how we view the transition to a low-carbon economy and what it might mean for us as asset owners. We talk about the importance of a successful transition — one that is orderly, where policy frameworks align and nature is included, the investment implications, and the winners and losers of the transition. It also looks at what we have done to date, including our recent paper The Policy Challenges of the Energy Transition, where we call for stronger action from governments to accelerate the energy transition and protect long-term financial stability, as well as our investment in companies that have the potential to accelerate the energy transition.
You can read more about our work in this area in our blog Why bold policy and smart investment are critical for a successful energy transition, and explore the report to see how this work supports long-term outcomes for our members.
Document downloads
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Responsible Investment: What it means to us pdf (6.44mb)
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The Policy Challenges of the Energy Transition pdf (657kb)