NEST will work with RepRisk and Sustainalytics to identify emerging ESG risks and screen out certain assets from its members' portfolios, the master trust has announced.
The £6bn scheme will gain access to the two providers' databases of ESG data, which automatically monitors news for reputational issues in order to form future engagement.
The databases will be fully incorporated within NEST's overall investment decision-making process as it aims to have a "more holistic" view of companies alongside traditional risk factors.
NEST head of responsible investment Diandra Soobiah said the master trust was investing to keep its "finger on the pulse" as it scales up to £15bn of members' funds in the 2020s.
"These new databases will present the latest available information about our investments, helping us make more informed decisions as to whether they meet our expectations," she said.
"Supporting ESG is fundamental to the NEST psyche and should be a vital part of every scheme's investment strategy. Our members want us to invest responsibly and the evidence is clear - considering ESG helps make better investment decisions."
The news comes after the scheme last week made the radical decision to completely divest from tobacco after concluding there was "compelling" performance evidence to do so.
In its announcement today (19 June), NEST also noted that companies performing well with ESG factors are more likely to achieve good economic returns over the long-term. It pointed to the MSCI Emerging Market ESG Leaders Index, which has outperformed the MSCI Emerging Markets Index for the majority of its history.
NEST said the RepRisk and Sustainalytics databases would be particularly useful as it moves into commodities and private credit asset classes, which it said require greater scrutiny, and to fulfil its responsibility to the Financial Reporting Council stewardship code.
RepRisk chief executive Dr Philipp Aeby said: "We are proud to have been selected as the provider of ESG data by NEST. By providing daily-updated analytics and metrics that are curated through a unique combination of artificial and human intelligence, we enable our clients to take more informed decisions for their investments."
Sustainalytics executive vice-president of ESG research Simon MacMahon added the provider was "honoured" to be picked by NEST.
"By leveraging our in-depth global compact and product involvement research, NEST can ensure its portfolio companies are in compliance with international norms and principles, and screen for companies involved in a range of products, services and business activities that may or may not align to its investment strategy."
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