Over two fifths (43%) of UK-based trustees and pension managers feel unequipped to monitor and report on their pension scheme’s Environmental, social and corporate governance (ESG) policy to a high standard.
CACEIS, an asset servicing bank, completed analysis which found that 73% of participants in the pensions industry are unfamiliar with climate change-related risks. Additionally, it found that over a quarter (26%) found getting access to the right information to help with their ESG policy to be very challenging. This information gap will make reporting even more laborious.
A new legislation was implemented on October 1 2019 which required trustees to outline how they approach financially material factors. This means topics such as ESG and climate change considerations must be addressed in decision making.
This regulation came as a way of ensuring trustees have a plan of action when embedding risks into trustee governance and strategic plans for schemes.
CACEIS stated that while good governance involves responsible investing, sometimes it is hard to implement an ESG framework due to the various touchpoints it requires. It can be challenging to assess the ESG characteristics of a company, the company said.
Despite the troubles, there is a momentum towards responsible and sustainable investing. Of those responding to CACEIS’ survey, 55% believe exposure to ESG-related investments will increase significantly in the next three years.
CACEIS managing director Pat Sharman said, “While 2019 saw ESG, and with it the improved standards of governance, creep higher on the corporate agenda; now is the year ESG becomes front and centre for UK pension schemes.
“From a corporate citizenship perspective, as well as fiduciary requirement, implementing climate change and good ESG principles will be important for pension schemes of all shapes and sizes to help manage longer term risks for the benefit of members. As a trustee myself, I fully understand the complexities involved – as a result, we are working with the PLSA for the second year running as an education partner and we’ll focus on helping trustees navigate this challenging landscape”.
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