20 July 2022
Pensions Minister Guy Opperman recently launched a new taskforce to address pension scheme engagement with the ‘social’ element of ESG investing.
Commenting on the new taskforce, Andrew Aston, pensions audit director, RSM UK, who is also a member of the Pensions Research Accounting Group ESG Working Party, said: ‘It is good to see ESG being embraced by the pensions minister with the announcement of a taskforce to support trustees, including the provision of practical metrics that will help trustees better consider their reporting on the “S” factor.
‘Most Investment Policy Statements are drafted by investment consultants, albeit with significant trustee input. The decision of whether to amalgamate or explicitly separate the different elements of ESG within these statements is down to the trustees, as led by their investment advisers. This means these statements often don’t get the right - or in some cases any - weighting towards the ‘S’ in ESG, as this is often the most difficult of the three elements to pin down. This is not helped by the constant shift between what might be a “good” or “bad” social weighting. If you consider the example of the ethical tightrope of investing in the arms Industry before and after the Ukraine conflict, this is not surprising.
‘Most people think of ESG as being predominantly about environmental factors. Climate change is of course fundamentally important, but so is corporate responsibility, as it includes factors such as management’s approach to human slavery and what sits within the supply chain. This taskforce presents an opportunity to ensure the focus on social factors continues throughout the investment chain, by identifying reliable data sources and metrics, and assessing and managing financially material social risks and opportunities.
I hope, given current events, that the Minister for Pensions is around long enough to see this initiative through to fruition.’