Pensions schemes are typically ahead of scheme sponsors, when it comes to progress on reducing carbon emissions, setting net zero goals, delivering positive social impact and a range of other ESG issues according to research from LawDeb.
The research challenged finance leaders in private sector companies with DB pension schemes to rank who was leading the charge on different elements of ESG: the scheme and its trustees, or the business and its executives.
This trend was most pronounced on environmental issues, such as addressing climate change and meeting net zero targets. In total 37 per cent per cent of in-house finance leads said the scheme and its trustees is the leader on environmental targets. In contrast just 21 per cent said they thought the business was leading the way, with 29 per cent stating both the scheme and business are co-leads.
Pension schemes also appear to be doing more than sponsoring companies when it comes to social impact, with 39 per cent of finance leads acknowledging the scheme’s leadership on this issue. Similarly more leaders say schemes are outperforming when it come to governance expectations (37 per cent) when compared to business leaders.
However, in some areas, both parties are relatively aligned. For example, a third of leaders (34 per cent) think both the scheme and business are leaders in diversity ambitions. But around the same number (32 per cent) think the scheme is leading the way, while 27 per cent believe it’s their company pulling ahead. A total of 6 per cent said neither the scheme nor the business are leaders on diversity.
In no area of ESG do more leaders think the business is pulling ahead.
LawDeb Pensions managing director Sankar Mahalingham says: “Pension schemes are required to manage their risks, including their ESG risks. A pension scheme operating at a good level of environmental and social responsibility, with excellent governance, will also be able to avoid posing a reputational risk to a sponsoring company. The responsibility for getting this right sits – legally – with the trustee board.
“It’s good that so many finance leaders feel able to play a significant role in improving how their schemes operate. However, it’s apparent that trustees are leading the way, and many firms have room for improvement.
“Finance leaders and executive boards at scheme sponsors are being pulled from pillar to post; so ESG factors are unlikely to currently be top of the priority list. It’s right that trustees – with more time and industry experience – are ensuring schemes are meeting their net zero ambitions, having a positive social impact, and embedding good governance.
“This research indicates that trustees have an opportunity to step up, and work with businesses and sponsors to enhance best practice and drive performance to improve member outcomes.”
