The National Employment Savings Trust (NEST), the UK auto-enrolment pensions provider, has said master trusts within the new, broader system of workplace pensions have a duty to take an active interest in where they invest and consider issues such as climate impact.

Publishing its first responsible investment report, NEST said incorporating ESG factors into its investment process across all its retirement date funds and fund choices improved long-term returns and reduced investment risk for all its members.

Mark Fawcett, NEST’s CIO, said: “Good-quality master trusts have a responsibility to take an active interest in where members’ money is invested and act on behalf of their members as owners of securities.

“That means considering a broad range of investment risks and opportunities, including issues like the move to a low-carbon economy, the way corporations treat the planet and how companies conduct themselves.”

The first report sets out how NEST engages directly with companies, regulators and industry bodies, and works with fund managers and other large institutional investors to increase effectiveness.

It includes case studies showing how it aims to understand and act on a range of matters that have an impact on long-term returns, sustainable markets and good business practices.

These include climate change and managing the transition to a low-carbon economy; banking culture and behaviour; the quality of company audits and the interaction between shareholders and auditors; and the role of pay in company performance.

Fawcett said anyone who thought this type of consideration was not relevant to long-term wealth creation should consider the billions of pounds in fines and damages imposed on large sectors of the banking industry.

“Companies that are well run, with engaged and active investors, are more likely to be successful in the long term,” he said.

In the report, NEST said that, though most of its equity investments were now made via indexed funds, this did not mean it was “passive”.

Unlike active managers, it said, it cannot sell its investments if a company is performing poorly, but it is able to be effective because it can “engage with a number of companies in a sector and feed back our findings industry-wide”.

It said its aim was to raise standards across the whole industry.

“From 2016,” it said, “where we don’t agree on issues we feel strongly about, NEST has the ability to override the voting intentions of our global equity manager.”

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