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How pension trustees and investment managers can avoid the ESG data trap

by

15 Jun 2022

Andy Agathangelou, founder of
Transparency Task Force outlines the role that Violation Tracker UK can play in tackling greenwashing.

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Andy Agathangelou, founder of
Transparency Task Force outlines the role that Violation Tracker UK can play in tackling greenwashing.

Investors and pension savers are finding it increasingly unpalatable to put their money into companies that are failing to do a decent job when it comes to any aspect of ESG. That’s good news, but it does create policy and operational challenges for pension scheme trustees and their investment managers.

Those challenges can be expressed by two questions: – Firstly, in terms of the policy challenge: “What is the right thing for our pension scheme to do, in relation to selecting companies we should and shouldn’t invest in?”– Secondly, in terms of the operational challenge: “What data do we use to base our ESG-orientated selection decisions on?”

I am not going to dwell on the policy challenge question because there are so many subjective, scheme-specific factors to be considered that any necessarily generic commentary would not be of any practical use.

However, I do think I have something of use in relation to the operational challenge question, so here goes: There’s no problem finding sufficient quantities of ESG data because so many companies are now pushing it into the market.

But because of the extent of greenwashing, there is a huge issue around data quality – much of it is little more than corporate marketing spiel that pension scheme trustees and their investment managers cannot rely on for stock selection decisions.

That’s a worry for many reasons, including the possibility of a troublesome disconnect between pension schemes’ Statements of Investment Principles and what’s happening in practice. It’s anybody’s guess what future litigation there might be around that in decades to come.

It’s for all these reasons that I rate Violation Tracker UK so highly, and why I am proud to chair the Violation Tracker UK Advisory Board. Violation Tracker UK is a massive online database that offers a treasure chest of valuable, verifiable data that shows a wide range of regulatory infringements by all kinds of companies, throughout the UK. It’s a powerful research tool that tracks corporate misconduct.

And thanks to donations by The Joffe Charitable Trust, The Joseph Rowntree Charitable Trust and The Reva & David Logan Foundation, pension scheme trustees and their investment managers can use it for free.

What’s not to like? All the hard work to bring the data together has been done for you – it’s been painstakingly assembled and made available in a remarkably easy-to-access and simple to search way.

And the important point is that the data is trustworthy, with the original data source of each case being provided in just a few clicks. The data sources are typically regulatory announcements, court decision statements and so on.

Trustees and investment professionals can search the data in many ways, including: – By company name, for example, BP, KPMG or Southern Water – By offence group, for example, employment infringements or environmental offences – By regulator, for example, The Pensions Regulator.

It’s not surprising, then, that Violation Tracker UK has won public statements of support from politicians, academics, thought leaders, investment professionals and a range of stakeholders. The phrase “knowledge is power” certainly rings true when it comes to Violation Tracker UK – you can think of it as “a transparency machine” or an “MRI scanner for poor corporate conduct” or an “ESG optimiser” or even an “anti-greenwash engine” – it has a multitude of uses and it’s set to play an important part in driving positive, progressive and purposeful corporate reform, especially if pension scheme trustees and investment professionals take time to learn how to get the most out of it.

The database was compiled by a team of UK and US researchers led by the Corporate Research Project of Good Jobs First – the Washington DC-based NGO founded in 1998. It’s a non-profit, non-partisan resource centre promoting government and corporate accountability.

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