Hermes Investment Management has unveiled a new ESG investing tool to help its fund managers assess a fund’s carbon performance and risk.
Hermes says the tool assesses the carbon risk of an investment fund relative to its benchmark and of listed companies with their peers.
The tool will also be used for client reporting to demonstrate how ESG is being integrated into a fund.
As well as identifying companies that need to reduce carbon emissions, the tool will gauge the level of carbon risk within portfolios and the progress being made by firms.
It will also calculate the profit at risk for an investment fund for different carbon pricing and policy scenarios.
Hermes head of investment Eoin Murray says: “Assessing carbon risk helps identify investment opportunities and threats to value, and begin or intensify engagements that can reduce the risk of holding exposed companies.”
A recent survey by Aon found that 68 per cent of institutional investors globally consider responsible investing important.
As social and environmental awareness grows amongst investors more and more asset managers embracing ESG investing.
However, anecdotal evidence suggests advisers have been less positive about recommending them.
Under new government rules unveiled this week, pension scheme members will be given powers to hold their schemes to account over how social and environmental factors impact their investments.
Last week, Legal & General Investment Management removed eight global companies from its Future World Funds range for not confronting the effects of climate change.