ESG as a Global Imperative in Pensions: Around the world, pension funds have become some of the largest institutional investors, and they are increasingly using their clout to promote sustainable business practices. Environmental, Social, and Governance (ESG) criteria are now a mainstream part of investment strategy. This means pension fund managers don’t just look at financial returns, but also consider whether companies they invest in are environmentally responsible, treat their employees and communities well, and have strong governance. The rationale is twofold: first, investments in companies with poor ESG practices may be riskier (e.g., facing regulatory fines, reputational damage, or even becoming stranded assets in the case of fossil fuels); second, many pension members want their retirement savings to contribute to positive outcomes, not just profit. Globally, we’ve seen a surge in sustainable investment options within pension plans – from green bonds to ESG-screened equity funds. For example, Europe’s pension funds often have to report on their portfolio’s carbon footprint and many have commitments to net-zero emissions in their investments by 2050. The UAE’s pension reform, coming at a time of worldwide focus on sustainability, has the opportunity to bake in ESG principles from the start.
UAE Context – Aligning with National Vision: The UAE itself has sustainability goals (for instance, the UAE Energy Strategy 2050 and Net Zero by 2050 strategic initiative). While the pension reform is driven by employee benefit modernization, it dovetails with these broader ambitions. By allowing funds to invest in “various economic activities in the UAE”
the scheme could channel significant capital into development projects – ideally, those that are sustainable. There’s a governance angle too: the scheme’s oversight by SCA and independent fund managers introduces accountability and transparency, the “G” in ESG, into what was previously an informal, on-balance-sheet provision by employers.
How HAYAH Integrates ESG into Pension Management: HAYAH has proactively embraced the ESG movement in its pension offerings. Through its partnership with global asset manager Azimut, HAYAH is able to provide a “diversified portfolio of investment options, including equities, fixed income, ETFs, sukuks, real assets, and alternative investments”
Within this suite, sustainable and ESG-focused investment options are prominently included
For instance, HAYAH can offer a fund that invests in companies with high ESG ratings or a climate-focused fund that targets renewable energy projects. This meets the growing demand for responsible investing among both employers and employees
In practice, when an employee logs into HAYAH’s pension portal to allocate their contributions, they might see fund choices labeled with an ESG badge or a Shariah-compliant badge. HAYAH ensures that those funds are not just labeled, but truly adhere to the criteria – likely by partnering with asset managers who specialize in ESG analysis. Additionally, active management of pension portfolios to optimize returns with dynamic asset allocation is part of the collaboration
This means HAYAH and its asset managers won’t adopt a passive “set and forget” approach; they will continually assess investments, and that includes tracking ESG performance of underlying assets.
Governance and Transparency: A major aspect of ESG is transparency – stakeholders want to know where their money is invested and what impact it’s having. HAYAH addresses this by offering detailed and transparent reporting on the performance of pension funds, investment strategies, and market outlook
For employers and trustees overseeing the pension plan, HAYAH can provide reports that include ESG metrics (for example, the carbon intensity of the equity fund, or a summary of how shareholder votes were cast on key governance issues). This level of reporting is not yet common in the region, but HAYAH is bringing global best practice here. By educating HR and finance leaders on these aspects, HAYAH helps them fulfill any corporate social responsibility (CSR) objectives tied to employee benefit plans. An HR director can go to management or a board and say, “Our employee pension isn’t just a benefit; it’s invested in line with our company’s sustainability values – here’s the report showing our pension fund’s ESG impact.” That’s powerful for corporate branding and culture.
Social and Governance (S&G) in the Workplace: Beyond environmental factors, the very existence of a funded pension plan touches on the “Social” component of ESG – it’s a social benefit for employees, contributing to their long-term well-being. Companies that adopt the scheme, especially with enhancements via HAYAH (like optional financial literacy workshops), demonstrate a commitment to their people. This can factor into ESG ratings of companies themselves, as workforce welfare is a consideration. Moreover, HAYAH’s strong governance standards (as an Abu Dhabi Stock Exchange listed company and Central Bank licensed insurer
Mean that the pension assets are managed under rigorous oversight. Plan sponsors (employers) can trust that there are checks and balances in place – for example, HAYAH’s funds are likely audited, and SCA’s licensing ensures fit-and-proper fund managers run the investments
This governance chain is crucial to avoiding pitfalls some global pensions faced decades ago when governance was weaker.
Responsible Investing Example – Case Scenario: Let’s illustrate how ESG plays out in practice. Suppose an employee chooses an “International ESG Equity Fund” option in the HAYAH platform. That fund, managed by Azimut on HAYAH’s behalf, will invest in stocks globally but screen out companies that violate certain principles (e.g., no tobacco, no coal mining, no companies with poor labor practices, etc.). It might also actively include companies leading in renewable energy, technology for social good, or those with diverse boards and strong ethics. Over time, this fund might engage with companies as an active shareholder – for instance, voting in annual meetings for better climate disclosure or for appointing independent board members (governance improvements).
From the employee’s perspective, they can retire knowing their money was building not just their future, but perhaps a better world for their retirement years. From the employer’s perspective, offering such options could be part of their ESG narrative: “Our company’s pension scheme (managed by HAYAH) is aligned with our sustainability mission – our employees can invest in funds that back the UN Sustainable Development Goals.” Some employers may even default contributions into an ESG fund (with employee ability to change), which is something seen in Europe now (default options with ESG tilt).
HAYAH’s Assurance of Responsible Management: HAYAH, by virtue of its mission and license, ensures that pension fund management is conducted responsibly. This includes adhering to any regulations about prudent investing and risk management. For instance, HAYAH will ensure diversification rules are met so that the fund isn’t overexposed to any single high-risk asset (often ESG investing also implies thinking long-term and not chasing short-term speculative gains). HAYAH’s move to become a full-service digital wealth manager
means it’s bringing sophisticated asset management techniques to the pension space. This can include incorporating ESG analytics – using data and AI to score investments on ESG factors and guide portfolio adjustments. As AI and big data tools become available, HAYAH could deploy them to continuously monitor ESG news (like controversies or improvements) about the companies in the pension portfolio, ensuring that the investments remain consistent with stated ESG objectives.
Regulatory Trend – Anticipating the Future: While currently the UAE doesn’t mandate ESG integration in pension funds, the global regulatory trend is moving that way. The EU has sustainable finance disclosure regulations, and many jurisdictions require pension trustees to at least state their policy on ESG. It’s plausible that in the next several years, the SCA or other bodies might issue guidelines for UAE pension funds regarding ESG (especially environmental/climate risks). By already embedding ESG into its offerings, HAYAH is ahead of the curve. Clients of HAYAH can be confident that they won’t need a sudden course-correction if such regulations appear – they’ll largely be compliant by design. This foresight is part of HAYAH’s value proposition stemming from its international partnerships and knowledge network.
Employees Drive ESG Demand: We should also note that younger employees, including the millennial and Gen Z workforce, care deeply about where their money is invested. A pension scheme can sometimes feel remote or intangible, but knowing “my pension is planting trees or funding solar farms” can increase engagement. HAYAH can leverage this in communications (for example, through its digital education and engagement tools, it might show an ESG fund’s impact in equivalences: “Your investment avoided X tons of CO2 this year” or “funded Y megawatts of clean energy”). This not only educates but also emotionally connects employees to their pension. Engaged employees are more likely to contribute voluntarily and stay with the program – which improves their retirement outcome and the plan’s overall success.
In conclusion, ESG factors are not a niche consideration but a central pillar of modern pension management. HAYAH recognizes that by providing ESG-aligned investment options, maintaining high governance standards, and using its platform to educate and report on these factors. For employers, this means the pension scheme can be part of their sustainability story; for employees, it means their hard-earned savings work not just for them but for the greater good. It’s a prime example of how a well-designed pension reform can generate triple benefits: financial returns, social impact, and environmental stewardship – truly a win-win-win for all stakeholders.
Sources:
International Adviser – HAYAH & Azimut partnership delivers sustainable and ESG investment options to meet demand for responsible investing
International Adviser – Collaboration offers active management of pension portfolios and transparent reporting on performance and strategies
HAYAH Insurance News – HAYAH’s license and platform uphold the highest standards of transparency and trust (robust governance)
UAE Government Portal – Savings Scheme aims for employees to benefit from investing in UAE economic activities (social and economic development objective)
Additiv Press Release – Employees can choose between traditional and Shariah-compliant funds aligned with their values
Gulf News (Event) – Industry trends highlight evolving nature of workplace benefits, including ESG considerations in fund management
(implied from context)
International Adviser – HAYAH’s CEO emphasizes building a sustainable future for UAE society through pension solutions
Global Sustainable Investment Review – (Background) Over 35% of professionally managed assets globally incorporate ESG criteria (indicating the relevance for pension funds)
(contextual support)