Industry groups have welcomed the latest guidance by the Department for Work and Pensions (DWP), which encourages trustees to be more transparent about ESG criteria in their investment decisions.
The DWP consultation paper suggests that trustees should be clearer in communicating to members and the public how they incorporate environmental, social and governance (ESG) criteria into their investments.
Louise Farrand, executive director at the DC Investment Forum, responds: “We welcome the government’s decision to clarify trustees’ fiduciary duties. Where trustees feel they should prioritise short-term returns instead of long-term viability, they are in danger of not taking account of the full spectrum of financially material risks, leaving savers vulnerable to a multitude of financial shocks.”
The group has recently released a survey among scheme members, which revealed that although a majority of 70% said they never made any choices on how pension schemes invested their money, members of all ages felt strongly about ESG issues. A majority of 60% said that they were interested in responsible investments for their DC pension money, the share was even higher among younger scheme members, with 80% of 22-34 year olds stating that they would like to see their money invested sustainably.
Caroline Escott, policy lead Investment & DB at the PLSA, adds: “As stewards of members’ money it’s good practice for schemes to be mindful of members’ views, such as ethical beliefs, when shaping their investment strategies, however it’s vital that new rules do not blur the role and responsibilities of trustees.
“Any new requirements must be practical, and must not place any unnecessary burden or constraint on schemes, or create excessive costs,” she said. “We look forward to responding to the consultation and continuing to work with the DWP and our members on this important issue.”
