DWP wants trustees to feel the heat over climate change

18 Jun 2018

Trustees for UK pension schemes could soon face additional reporting requirements on  their scheme’s ESG strategy.

A consultation paper published by the Department for Work and Pensions (DWP) earlier today suggests that by the end of 2019, trustees should be required to publish a Statement of Investment Principles, which should set out how they factor in Environmental , Social and Governance (ESG) criteria into their investment process.

This information should be available to both scheme members and members of the public.

The consultation paper also suggests that by the end of 2020, trustees should have an implementation report available which outlines how they acted on their Statement of Investment Principles.

The document has been released in response to earlier policy assessments, including the 2012 Kay Review, which highlight confusion among trustees as to whether they obligation to maximise returns for members precluded considering long-term sustainability factors.

The DWP Consultation Paper, entitled “Consultation on clarifying and strengthening trustees’ investment duties” states that it aims to reassure trustees that they should take into account broader risks covered in non-financial reporting.

It also stresses that stewardship activities such as monitoring, engagement and  shareholder resolutions were part of their responsibilities.

The initial suggestions were welcomed by environmental campaigners.  Bethan Livesey, head of Policy at ShareAction, said that the group was delighted with the proposals:

“For too long, many pension schemes have disclosed vague, high-level statements on their approach to ESG factors, and failed to report on what, if anything, they were doing to protect members from the rising investment risks of issues such as climate change.

“Pension schemes seem to fall into three camps: those who understand the financial relevance of ESG factors seriously and act accordingly, those who say they understand but do very little and those who have no clue. These regulatory changes will help expose negligence and neglect, and help protect savers from poorly managed risks” she adds.

 

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