Responsible investing is important for the youngest members of the National Employment Savings Trust pension scheme, the chief investment officer has claimed.
Mark Fawcett said: "This isn't about doing good in society primarily, but really about achieving better risk-adjusted returns.
"If you consider that our youngest members are 17 or 18 years old, and we are going to be investing for them for about 40 years, then things like climate change are going to be really important factors."
He told FTAdviser that one of the ways in which NEST was promoting responsible investing was that it is looking to reduce its carbon exposure through a low-carbon fund.
Mr Fawcett added that NEST was also thinking about how to improve the governance and management of companies through engagement.
This came as NEST announced a partnership with UBS Asset Management to create a "climate aware" equity fund that will form a major pillar in its overall investment strategy.
Called the UBS Life Climate Aware World Equity fund, the strategy will invest in companies on the FTSE Developed Index, with a tilt towards companies in the renewable energy sector, and away from high carbon emitters and those that are unprepared for the transition to a low-carbon economy.