More than one in four pension trustees and managers said a lack of products made it difficult to implement investment policies which take account of environmental, social and governance (ESG) factor, according to a new survey.
Those identifying this problem also expressed concerns about ‘greenwashing’ — a term is used to describe investment products which may be more about the ESG marketing spin than substance.
The survey, by law firm Sacker & Partners asked more than 100 trustees and managers about their attitudes on a issues relating to ESG, including member views, fiduciary duties and financial and practical considerations.
The research showed there was demand for clear jargon-free advice and guidance on ESG products in order for them to be more accessible for trustees.
The report also showed there was the clear perception among respondents that the integration of ESG strategies within DC default funds was lagging. Sackers said the development of a greater number of funds with demonstrable ESG integration is needed to combat this.
The survey also showed that trustees’ primary focus remains a financial one, and there is confusion around the extent to which member views should be taken into account.
The report pointed out that ethical preferences which are non-financial in nature should be regarded as a secondary consideration and can only legally be taken into account in strictly limited circumstances.
Sackers partner Stuart O’Brien says: “Trustees are under pressure to achieve and demonstrate compliance with a growing list of requirements to increasingly tight timeframes.
“Despite these broader concerns, there was a clear recognition of the importance of ESG and climate issues to pension scheme investments from respondents, whose trustee boards are working hard to comply with their fiduciary duties and achieve the best outcomes for their members.”
He adds: “Advisers have a significant and ongoing role in supporting trustees through these successive changes to regulation, particularly as changes in a scheme’s investment strategy, and subsequent material changes to its investments, will take time to achieve.”