She said: “The regulator needs to absolutely step up its game because the trustee toolkit is woeful when it comes to this whole area. Whether we like it or not, [the toolkit] is a benchmark for the kind of knowledge and understanding trustees have and they are not going to aspire to go beyond that unless someone is putting forward what they need to have in their personal toolkits.”
Redington managing director, investment consulting, Robin Claessens agreed. “[UK regulation] is the weakest in Europe,” he said. “Trustees work one day a quarter. If you compare that to Holland where the central bank is the regulator, it means they take their pensions seriously. We as an industry manage the biggest pot of money in the nation, but we have a weak regulator which means weak boards and weak governance.”
Environment Agency Pension Fund chief responsible investment and risk officer Faith Ward said not enough was being done at the highest level to encourage trustees to operate to higher standards when it came to fiduciary duty.
“We have been keen for TPR to be a lot more vocal,” she said. “It’s done some of this on DC schemes, but needs to do more on DB.”
Axa Investment Managers head of corporate governance and responsible investment Shade Duffy said in other countries, such as France, there was more top-down direction for asset owners on ESG.
“Since hosting COP 21, [France] has passed a law putting the responsibility to transition to a low carbon economy on the institutional investment community,” she said. “As an asset owner you have to understand your climate change exposure, your risks and what you are going to do to mitigate it.”
RENEWABLE ENERGY
The £16bn Strathclyde Pension Fund explained its approach to investing in renewable energy.
Director of the scheme, Richard McIndoe, said the scheme’s renewables investments were driven by a bottom-up approach to sourcing opportunities for its new opportunities portfolio which contains 12-15 direct investments, including solar and landfill gas extraction.
The top-down approach meanwhile, involves measuring the carbon impact of its portfolios which, he said, was straightforward in the main but trickier across its private equity, small cap and emerging markets exposures.
“We haven’t decided how we will address what comes out of that [carbon impact assessment], but we will disclose it because we are very transparent. We are not attracted to divestment, but to low-carbon indices and how that could be a part of a top-down solution.”
Mercer senior associate, responsible investment, Kate Brett warned trustees not to rush into divesting from carbon because it was a more complicated issue than it appeared to be.
